Evolution of Ford Motors

THE CORPO RATE EVOL UTI ON OF THE FORD MOTOR COMP A NY OF C A NA DA 1904-2004 SARDAR KHAWAR ADNAN AHMAD

ABOUT THE COMPANY

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Manufactures and distributes automobiles on six continents

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Employs approximately 224,000 people and operates 90 plants worldwide.

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Brands include Ford, Lincoln, Mercury, Volvo, Mazda and Ford Motor Credit Company (financial service).

FORD’S BRIEF HISTORY

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1903 – Ford Motor Company founded in Michigan

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1908 – Model T introduced

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1913 – first moving automobile assembly line in the world 1956 – Ford’s stocks go on sale (10.2 million shares sold the first day)

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1987 – beginning of the acquisitions of other brands

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1988 – Ford Motor Company reached the peek

THE ERA OF AUTOMO TI VE PIONEERS: FORD OF CANADA’S BIRTH •

Ford already lost two companies

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In return for granting the use of Ford patents and drawings , the stockholders of the Ford Motor Company received 51 percent of Ford-Canada, divided according to their srcinal Ford-U.S

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By that point, the Company had become the most profitable enterprise in the world

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Henry Ford and his investors were millionaires

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Model T was the most successful car in the industry

CONTINUE… •

Ford-Canada's operational tone and relationship to the American firm was set very early

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Company's management acted largely independently of Ford-U.S

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The two companies operated as distinct entities

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For example, Ford-U.S did not produce a two-door Model T in some years, while the Canadian company produced four-door Model T's

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The 1904 agreement granted Ford-Canada the exclusive right to "manufacture and sell" Ford products in the British Empire

“NOT A BRANCH PLANT”: FORD AND THE

POLITI CA L ECONOMY OF T HE CA NA DI A N A UTO INDUS TRY , 1900-1920 •

High duties ensured that the Canadian auto sector grew up as a "creature of the tariff,“

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In 1904, McGregor was keen to provide Canadians with a reliable, workable vehicle, while Ford in Detroit already had the technology, and, most critically, the product.

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The Canadian venture would cost Ford little beyond sharing his production and engineering plans and providing his "services" to the Canadian company.

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In exchange, Ford would share in any profits that the Canadian company might generate in the future, and Ford vehicles and the Ford name would be popularized in a neighboring market.

CONTINUE…

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By 1909, the tariff had not yet come to pass

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As the srcinal Canadian automotive "early adapter," McGregor established a

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Ford operation in Canada McGregor was in charge of the Canadian operations, Ford allow his Canadian counterpart to continue the managerial approach of "one-manleadership“

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Ford had not allowed any public ownership in the European companies

THE “PROBLEM” OF FORD’S CANADIAN

OW NE RS HIP, 1920-1940 •

Henry Ford took little interest in the Canadian firm

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His only son, Edsel, was keen to bring the company under the parent firm's control

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Campbell proposed that Ford family utilize the unissued voting shares that remained in Ford-Canada's treasury to control a "voting trust“

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Campbell was in fact keen to see the Ford family have "returned to them the voting control srcinally contemplated in the 1904 agreement“

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Campbell did not consider that Ford of Canada's independent status was harming the Ford family, but he felt that the Canadian company would be best served by remaining a Ford-controlled entity

CONTINUE…

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Campbell admitted, without Ford's ingenuity and the American Ford Company's successes, the Canadian company would be nothing

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"Anyone closely identified with either the American Company or the Canadian Company knows that the Canadian company can only carry on business provided the Canadian company has the full co-operation of the American Company and those associated with it”

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By 1930, Edsel had purchased another eleven thousand voting shares, bringing his control over the voting stock of the Canadian company to 47 percent.

THE ERA OF ORGA

NIZ ATI ON MEN: FORD GA

MA JORITY OWNERSHI CONTROL OF FORD-CA

INS

P A ND ORGA NI ZAT IONA L NA DA , 1945 -1 965

ascendance, transformed the Ford Motor Company into a modern, professionally managed organization, also had a significant impact on the relationship between Ford-U.S

• Edsel’s

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Purchased blocks of shares on the open market and from the Ford family, giving the Ford Motor Company 52 percent of the voting shares of FordCanada

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The company expanded the board from five to seven members

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The Canadian company was quite receptive to the new arrangement, which substantially curtailed its operational independence in a host of areas

CONTINUE… •

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In early 1950 Roberge informed the Canadian management that "under the new relationship agreement dates as of May 1, 1949, it will, of course, be necessary for to supply the Associated Products organization with information concerning your company's activities“ Established Ford International in New York, to "give coordination, advice, and assistance to all Ford international activities" and to streamline the company's international organization and control Ford-Canada, as a unique entity within the Ford Empire that exported products to its "exclusive territories," did not easily fit into the new organization

CONTINUE…

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The Canadian company's managers were opposed to this idea

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Ford executive offices settled the matter: Ford-Canada would report to Ford headquarters in Dearborn, and the company would remain outside the Ford International hierarchy

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Henry Ford II himself soon became a key player in efforts to integrate the North American industry, a move that meant the final end of Ford-Canada's operational independence.

THE ERA OF CON TI NENT A L INTEGRATI ON: FORD- CA NA DA A ND THE A UTO- PA CT REGIME, 1965-1975 •

The Canadian negotiators understood that unrestricted free trade could wipe out Canadian production in an industry already over 90 percent owned by American interests

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Instead, the two governments and the industry came to a compromise: the Canadians succeeded in having local content, investment, and output targets that guaranteed certain levels of Canadian production in the American market

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The auto pact provided a new departure for the company's North American operations

CONTINUE… •

Henry Ford being an advocate of free trade, although had often held his tongue on the issue of Canadian Ford company, which needed tariff protection in order to avoid being overwhelmed by American imports

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Trade treaty, reduced Canadian auto tariffs, prompted Campbell to implore Edsel Ford to tell Washington that the Big Three auto companies were not in favor of this measure, as it would impact their Canadian subsidiaries

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Ford II's Canadian officials had kept him informed of the latest developments on the negotiations between the industry and the Canadian government

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The new arrangement allowed to import parts and autos duty free, as long as they maintained a minimum 50 percent North American content

CONTINUE… •

Ford officials had explained that they foresaw difficulties meeting the Canadian value-added requirement, due to rationalizing engine production so Canadian-made vehicles would no longer contain Canadian-built engine parts

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The president of Ford-Canada, now reported to the head of the sales group for North American operations, while the director of the Canadian Overseas Group was responsible to the parent company's executive vice president in charge of overseas operations.

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Formerly an independent company with its own hierarchy and structure, Ford of Canada had become a mere division within Ford's North American operations.

FORD OF CANA

DA IN T HE NORT H A MERI CA N

A UTO INDUSTRY , 1975-2004 • North American industry faced dramatic challenges as the Big Three responded to the oil embargo and energy crisis, the flood of Japanese imports, the restructuring of the industry in the late 1970's and early 1980's, the arrival of foreign transplants in both the United States and Canada, and the creation of the 1989 Canada-United States Free Trade and 1993 North American Free Trade agreements •

In response the Big Three shifted a greater percentage of their North American assembly operations to Canada in an effort to take advantage of lower costs and good productivity and quality results at its Canadian facilities

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In 1965, Canadian production was 7 percent of the continental marketplace, yet by the 1990’s, Canadian production consistently outpaced that of North America by 15 percent.

CONTINUE… • For Ford, this meant that, by the 1980’s and 1990’s, its Canadian plants were

the sole production source for its Windstar/Freestar minivan and its important Crown Victoria and Grand Marquis midsized cars, which form a significant element of fleet police vehicles and taxi cabssales and are used throughout North America as •

Ford had reorganized its North American concerns into the North American Automotive Operations (NAAO), consolidating the United States, Canada, and Mexico in 1972

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By 1984 the parent company, had gobbled up all but 11 percent of its Canadian subsidiary

CONTINUE…

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In April 1995, Ford announced that as part of this global "Ford 2000" strategy, the company would buy out the remaining 1,250 Ford-Canada shareholders at $150 per share and take the company private

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The plan was to cost the company C$76.6 million and end Ford-Canada's eight decades as a publicly traded company

SWOT ANALYSIS

Strengths

Weaknesses

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Strong and globally positioned brand names

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A lot of time spent to actually put the product on the market

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Large employee base with highly educated engineers and good R&D department

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Recording continuous losses (net income) from 2006

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One of the largest automotive manufacturer (along with a long history)

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Low quality of new products (recalls – causing losing customers)

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1285% increase in net cash

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Lack of management of the company

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Huge increase in total equity

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EPS very bad – in negative numbers (unattractive for the investors)

SWOT ANALYSIS CONTINUE…

Opportunities •

Consumers demand hybrid and fuel efficient vehicles

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Threats •

Weak USD

Increase in consumer spending trends

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Increase in steel and resin pricing Increasing gasoline prices

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Consumers demand more innovative vehicles

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Stricter CO2 emission standards

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Global expansion

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Increasing mortgage rates

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Industry experiences slow and steady growth

NEW OBJECTIVES

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Reduce manufacturing expenses by 15-20%

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Introduce new small fuel efficient vehicles

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Enter Latin American and Asian market with hybrid vehicles Develop affordable electric car for US market

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Increase market share

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Build up strong financials (increase net income and EPS by 15%)

RECOMMENDATIONS

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Manufacturing of new small fuel-efficient vehicle

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Entering the Latin American and Asian market with hybrids

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Implementation of electric car in the US market

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Manufacturing units in Asia and China zone for lower cost

THANKS!