The Ford Motor Company, a global American multinational automotive and an automaker leader based in Dearborn, Michigan produce and distribute automobiles across six continents. The company’s establishment dates back to the year 1903 by Henry Ford. It is the fifth largest motor company in the world. The company has about 163,000 employees and approximately 70 plants globally. The main automotive brands for the company include Ford and Lincoln. In addition, the company provides financial services via Ford Motor Credit Company (Ford Motor Company, 2012).
The company is fascinating to study as it has expanded becoming one of the leading automobile producers in the world. The intention to focus on the company anchors on the fact that the company is a multinational Corporation with global operations. In addition, the economic ideas on production depend on how the company carries and performs strategic choices globally.
The company has made strategic tradeoff choices in carrying its operations. The tradeoffs include the options of divesting in some of its operations. The company had to close some of the nonperforming plants in North America. This intends to enable the company to transfer its production facilities to Mexico in the future. In addition, the company sold the Jaguar brand and Land Rover brands that it had previously purchased to Tata Motors for $2.3 billion in 2008. This divestment is a tradeoff to the company with regard to its stability in the market.
II. Economic impact
The Ford Motor Company’s financial performance of years has continually posed challenges to the company’s sustainability. Ford Motor Company has an immense and significant influence on the economy of the United States and the world. This impact is broad and diverse. The success of the Ford Motor Company directly affects millions of people in the world. This includes employees, retirees, Ford dealers, investors, and suppliers. On the other hand, Ford has an indirect economic impact on several communities in the countries that the company has operations (Dornbach-Bender, 2009).
The Ford Motor Company must move its production zones from regions of high labor costs especially in the United States and Europe. The country intends to move the production facilities to Mexico in order to achieve a cost advantage that results from lower labor and production costs (Dornbach-Bender, 2009).
The overall financial health of Ford Motor Company has improved over the past years after a struggle from financial challenges. The Ford Motor Company reported a net income loss of 14.57 billion dollars in the 2008 financial year. This signaled a bad economic situation affecting the company (Dornbach-Bender, 2009).
Several financial reports estimated that the Ford Motor Company will remain solvent throughout 2009 as compared to GM and Chrysler placed on bankruptcy. At the start of the year 2009, the company had approximately fifteen billion dollars in cash on hand. The company also drew ten billion dollars from its revolving fund in February 2009. This clearly shows that Ford Motor Company remains solvent. This reflected a positive sign on the financial health of the company ion a year marked with deteriorating financial conditions in the United States motor industry (Dornbach-Bender, 2009).
In the year 2010, Ford has continued to improve its own financial position significantly. The company achieved full year profitability in 2010. The strategy that enhances the financial health of the company includes the introduction of new products that consumers in the market can receive. The company has also substantially reduced its debt burden in 2010 and early 2011. This has effectively improved the cash on their balance sheet.
The sales increase of the company represents a positive impact on the financial performance of Ford Motor Company. The sales grew by 17 percent in the year 2011. The Ford brand showed a 20 percent rise while the Lincoln brand showed a 3 percent increase (Ford Motor Company 2012).
In addition, the company repurchased its debt as a measure that will ensure long-term financial stability of the company. The debt reduction enabled the company to reduce $ 9.9 billion in debt. The company achieved this by using $2.4 billion in cash and issuing common stock shares worth approximately 468 million. The restructuring improved Ford Motor Company’s balance sheet. It also resulted to 500million saving in interest (Ford Motor Company 2012).
The company develops this by focusing on four key priorities. They include the company to restructure aggressively in order to enhance and operate profitable at the current market demand and changing the model mix. The company also plans to accelerate the development of new products to meet the needs of the customers. Further plans on enhancing the sustainability of global sustainability issues by financing their plan and improving the balance sheet. To achieve this, then the company needs to work together as a team (Dornbach-Bender, 2009).
Monetary policy plays a critical role on the performance of the economy. The Ford Motor company and other players in the automotive industry play a key role in the economy of countries. The performance of the automobile industry depends on economic performance. Under monetary policy, the government sets signals on economic performance (National Academy of Engineering et al., 1982). Under low interest rates, the company can sell more cars because of affordability of the cars. This also implies that the company has to produce additional automobiles. When the interest rates increase, it means that more cars will remain unsold in the hand of the dealers thus affecting negatively on the production of cars. Therefore, monetary policy determines the rate of interest rate the government sets which in turn determines the performance of Ford Motor Company in the automobile industry.
Dornbach-Bender, R., Slade, B., and Thorpe, J. (2009). Strategic Report for Ford Motor Company, Report by Oasis Consulting, retrieved on May 5, 2012 from http://economics-files.pomona.edu/jlikens/SeniorSeminars/oasis/reports/F.pdf
Ford Motor Company (2012). Ford’s 2010 Sales up 19 Percent – Largest Increase of any Full-Line Automaker; Foundation Set for Growth in 2011, retrieved on May 5, 2012 from
National Academy of Engineering et al. (1982). The Competitive status of the U.S. auto industry: a study of the influences of technology in determining international industrial competitive advantage New York: National Academies