When Henry Ford established the Ford Motor Company in 1903, he could not have foretold the profound effect he would have on the automobile industry. Henry Ford can be said to have transformed the automobile from a luxury utility into an innovation that greatly shaped the 20th Century and still continues to impact the 21st. Entrepreneurs and innovators are responsible for change in society. They formulate, develop and promote new or acquired ideas until they grow into realistic concepts and applications which become acceptable in our day to day lives. Innovation requires creativity, self-confidence, risk taking, good leadership qualities and a visionary spirit. Henry Ford possessed all the above characteristics but it still took him quite some time to develop his ideas to fruition. The paper will focus on the major achievements of the Ford Motor Company from its inception to the present and how these achievements were realized. While the paper will place emphasis on the Ford Motor Company, it is impractical to discuss the company’s inception without discussing the man behind its rise and success. For this reason, the paper will also describe Henry Ford’s earlier experiments, his failures and finally his success with Ford motors (Casey, Dodge and Dodge).
The Ford Motor Company was established in 1903 and since then, Ford has successfully created a niche in the global automotive industry and ranks among the world’s largest automotive manufacturers. According to a case series written in 2010 by Kotzegger under the direction of Schlegelmilch and Bjorn, all of the Institute for International Marketing and Management at the WU - Vienna University of Economics and Business, the automotive giant manufactures and distributes vehicles in more than 200 markets across five continents. Ford is primarily based in the United States and Europe but has 95 plants in various parts of the world. As of December 2007, the company which is headquartered in Dearborn, Michigan had about 246,000 employees. In the same year, the company recorded revenues of $172,455 million which was a 7.7 percent increase from the previous fiscal year. The operating profit at the time stood at $5.631 billion compared to the previous year’s operating loss of 8.190 billion. The net loss in the 2007 fiscal year was $2.723 billion compared to the $12.613 billion net loss in 2006.
Ford has two business divisions which include the initial automotive division and a financial services division established in 1923. The automotive division is tasked with vehicle production and caters for small, medium, large and premium segments as well as vans, buses, trucks and Small Utility Vehicles (SUVs). The brands manufactured include Ford, Lincoln, Jaguar, Mercury, Mazda and Volvo. For also has a 33.4 percent ownership stake in Mazda. Following the increased consumer trend towards smaller, economical and fuel efficient cars, Ford’s business has grown in this segment. The automotive division is further organized into regional segments Ford Europe, Ford North America, Premier Automotive Group (PAG), Ford South America, and Ford Asia Pacific & Africa and Mazda. Ford also provides a variety of after-market services and products through a well-established dealer network (Haas-Kotzegger, Schlegelmilch and Ambos).
The Financial service division also known as the Ford Motor Credit Company is a fully owned subsidiary of Ford established in 1923. It main function is to provide automotive financing for all dealers and customers dealing in Ford and associated products. The division was established to help Ford Motors dealers provide competitive financial services suitable for both businesses and home consumers. Such services include wholesale and retail financing, and third party claim management services. In the 2007 fiscal year, revenues for each of the divisions stood at 89.5 percent for automotive and 10.5 percent for financial services (Haas-Kotzegger, Schlegelmilch and Ambos).
Ford Motors: History, Achievements and setbacks:
Ford Motors was founded in 1903 by Henry Ford and 11 other business partners. During this period, there were 87 other car companies but the automotive industry was a luxury affair and only the wealthy could afford to own cars. However, Ford discovered that he could harness a larger market by selling affordable vehicles. All he required was the right technology to make cars available to the general public. Ford therefore placed emphasis on manufacturing efficiency and in the process he was able to produce more cars at budget prices (Gross).
Ford’s major breakthrough came in 1908 when he launched the model “T” vehicle also referred to as “Tin Lizzie”. The car was quite powerful at the time with a possible maximum speed of 45 miles per hour. The car had a 20-horsepower, side-valve four cylinder single block engine and a two-speed planetary transmission. The vehicle also had a 100-inch wheel base and could run 25 miles on a gallon of gasoline (Gross).
However Ford’s greatest innovation was the manufacturing process. In 1914, at the Highland Park plant, Ford introduced the moving conveyor belt which led to a significant increase in production. In fact, the process was so efficient that Ford manufactured 308,162 cars which was more than the combined production of all the other automakers. This inadvertently made Ford the inventor of mass production (Gross).
In 1917, Henry Ford built the first manufacturing complex where raw materials, parts and complete automobiles could be processed all in one place. In the same year, Ford began to manufacture tractors and trucks. In the year 1919, Henry conflicted with the other stockholders which saw some of them leave and the Ford family assuming full company ownership. The year 1922 saw Ford enter the luxury vehicle market after it acquired the Lincoln Motor Company for $8 million (The History of Ford Motor Company: An American Legend).
In the mid 1950’s, the Ford Motor Company went public and also during this period, Ford introduced the much acclaimed Ford Thunderbird in the first auto show at Detroit after the end of the Second World War. The legendary two-seater sports car became a legendary product and grew with each generation for the next five decades. Throughout its production, the Thunderbird underwent a series of design changes ranging from sedans, coupes, hardtops, convertibles to mid and large sized configurations. However, its production was interrupted in 1997 after which it was returned as a retro style roadster in 2001 (The History Of Ford Motor Company: An American Legend).
Ford’s global expansion intensified in the 1960’s after the establishment of Ford Europe in 1967, and the “North American Automotive Operations” division in 1971 to consolidate operations in the USA, Mexico and Canada. Over the next two decades, the company extended its operations deeper into Europe and Asia. In 1987, Ford helped form the Park Ridge Corporation to aid in the acquisition of the Hertz car rental business. In 1994, Ford raised its ownership stake in Hertz to 100 percent. The growing US economy in the 1990’s coupled by low fuel prices led to increased vehicle sales in the domestic market. Ford Company also acquired Land Rover and Jaguar in the same period.
Ford extended its presence in China and Thailand in the years 2002 and 2003 respectively. In fact, in 2004, Ford went into a deal with Chinese government to acquire rights to land in Nanjing where the company planned on building a second Ford plant in the country. The year 2005 saw Ford take full control of operations in India by purchasing a 16 percent stake from its partner, Mahindra & Mahindra Ltd. Ford had initially setup an Indian subsidiary company in 1995 at Madras on a 50 percent co-ownership venture with Mahindra (Haas-Kotzegger, Schlegelmilch and Ambos).
Starting the year 2000, Ford’s sales performance began to decline due to hiking fuel prices, the slowing economy and Ford’s product mix that focused more on fuel-intensive passenger vehicles. In the same year, Ford also started to face a reputation loss due to the frequent accidents caused by bad tires fitted onto all Ford explorer motors. In fact, tire manufacturer Firestone had to recall more than 6.5 million tires after Ford explorers caused over 200 rollover deaths. Apparently the tires would explode while the car was in motion leading to the SUVs losing control. In 2001, another 13 million tires were recalled by Ford. Consequently, Firestone dumped Ford as a client and accused the company of using Firestone as an excuse to deflect attention from the Ford Explorer. The product recalls cost Ford $2 billion. Federal investigators worked on the case and discovered that tire defects were indeed the cause of the roll overs. In 2005, the tire company decided to pay US$ 240 million to Ford to help cover the recall costs. However, due to the loss of reputation, Ford’s credibility as a reliable and safe manufacturer sank and the public lost confidence in the company. Other Mazda product recalls in 2004 and Ford SUVs and pickups in 2005 also led to the company’s downward trend (Haas-Kotzegger, Schlegelmilch and Ambos).
After struggling with its operations since the year 2000, Ford’s troubles reached an all-time high when the company registered a US$ 12.7 billion in the 2006 fiscal year. In 2006, the company decided to work on a turnaround plan which was dubbed the “Way Forward Plan”. The main aim of this plan was to conduct a major restructuring and restore Ford back into the profit making business. The initiative was started by Henry Ford’s great grandson, Bill Ford and was continued by Alan Mullaly who became the new company CEO after Bill in September 2006. Mullaly had earlier served as Executive VP at Boeing and as CEO and president of Boeing Commercial planes. The restructuring process involved four key priorities which included changing the product mix and aggressive restructuring for profitability and acceleration of development for the various products consumers wanted and valued. Other priorities included financing the Way Forward plan and working together with efficacy as a global team (Haas-Kotzegger, Schlegelmilch and Ambos).
The first results of the restructuring plan were realized in 2007 when the company recorded revenues of $172,455 million in the fiscal year that ended in December 2007 which was a 7.7 percent increase over the previous year. Since the year 2009 Ford has been the best-selling vehicle and truck brand in the US and by the year 2013, the total sales were 2,493,918 vehicles (Corporate.ford.com).
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