Ford - The 'Way Forward' Restructuring Program
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Case Details:
Case Code : BSTR204
Case Length : 15 Pages
Pages Period : 1996-2006
Organization : Ford
Pub Date : 2006
Teaching Note :Not Available
Countries : US
Industry : Automobile
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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EXCERPTS Contd...
Ford's Other Problems
According to analysts, other major reasons for Ford's sagging sales were its models which failed to attract new customers. Customers preferred the superior and efficient models manufactured by foreign manufacturers.
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To improve its sales, Ford started offering heavy discounts on its vehicles. For example, in October 2005, US automobile manufacturers including Ford gave incentives worth around US$ 2,800 for each vehicle while Japanese manufacturers gave only US$ 950.
The result was that the Japanese automobile manufacturers gained a record 36% market share while the market share of US automobiles fell to an all time low of 52.3%.
Industry analysts said that young people in the North American region preferred trendy vehicles manufactured by the Japanese manufacturers and considered them superior to domestic models...
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Efficiency in Production
In order to reduce costs and improve the quality of its
products, Ford planned to make its production systems leaner and more
efficient. In North America, instead of working on developing a new model,
Ford planned to use similar architecture that its manufacturers in Europe
and other parts of world had used to build vehicles.
This measure would significantly reduce the company's R&D investments and save time. Ford planned to decrease the number of various engine architectures from 30 in early 2006 to around 14 while increasing the percentage of identical parts that were used in its models from the current 21% to about 50% gradually. The global architecture program included brands such as Ford, Jaguar, Mazda, Lincoln and Volvo. Ford would also make efforts to reduce its product development time and invest in making its production system lean and flexible by the end of 2008. For this, it planned to enter into strategic long-term relationships with its suppliers globally...
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Smaller Organization
One of the main objectives behind the 'Way Forward' program was to improve the capacity utilization of Ford's assembling plants in North America. Towards this, Ford planned to close down its 14 manufacturing facilities which included seven vehicle assembly plants by 2012. The company named only a few facilities that would be closed by the end of 2006...
Will the Plan Work?
A few analysts felt that 'The Way Forward' program was likely to steer Ford in the right direction. They said that it was only a matter of time before Ford could get its act together. According to Scott Roth, President of the Greater Louisville Automobile Dealers Association, "The market today dictates what manufacturers are making. I think the technology is there for Ford to respond to customer demands. It's just a matter of making it happen..."
Exhibits
Exhibit I: US Market Share of Ford (1990-2004)
Exhibit II: Ford Revitalization Plan
Exhibit III: Ford - Financial Performance in North America (2001-05)
Exhibit IV: Ford - Financial Performance (2001-05)
Exhibit V: Aligned Business Framework
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