Monday, April 4, 2011

My Project Thesis for Ford Motor Company Chapter One.

Management consulting is one service that I've hoped to offer since my conclusion of classes in 2008. Incredibly, I have one class left for a bachelor's degree and no money to complete this as of yet. This was in Management and Organizational Development at Spring Arbor University. Right now, I'd like to not see this wasted. I care about my work and offer straightforward advice and solutions that are sustainable for any organization. In this interest, I am going to post my project thesis I did in 2008 when the "big three" were serious trouble. Remember the bailouts? I do.

History and Background of the Problem:

The present situation at Ford Motor Company is a lack of sales. Although the present economic condition may be responsible for this problem, the fact that fuel prices are at record highs and the present lineup that Ford offers consists mainly of light trucks that traditionally have higher rates of fuel consumption than cars have. There is also another issue contributing to poor sales that Ford can control. This is the customer perception that American-made vehicles are poorly built and have lower reliability than vehicles made in Asia or Europe. Ford has had some serious problems with reliability as of late, including, but not limited to cruise controls that can catch fire and cause property damage and/or personal injury. Other issues concerning their trucks are they are reported to spit spark plugs with low mileage engines. The former is under recall and Ford has had a shortage of parts, while the latter management has chosen to let the customer pay for repairs. These repairs can be in excess of several thousand dollars.

During the SUV boom of the 1990’s, Ford and other domestic automakers had little incentive to address quality concerns or fuel economy. Fuel was inexpensive and disposable income among the buying public was high. Starting in 2000, fuel prices increased and in 2001, incomes fell flat. This is a trend that continues to this day. Ford has eliminated jobs and cut back on products in an effort to stem the financial ramifications of past corporate decisions. The issue of tightening credit is not unique to the housing industry. Tightening credit is also a factor that automakers have to deal with as the Dow Jones Industrial Average continues to lose value.

Scope of the Project:

One problem with deciding the scope of this project is that Ford Motor Company is a large, multi-national organization facing many problems in the United States and abroad.

Considering all the factors, implementing a project attempting to address all of the reasons for Ford Motor Company’s poor sales will be beyond the capabilities of this project.

It would be fiscally unfeasible to expect a firm beleaguered by heavy financial losses to implement a project such as General Motors has with the Volt, which is expected to carry a $40,000.00 price tag to the consumer. Although there is the possibility of a loan from the United States government as of late for $25 billion, this is still not a guarantee as of this writing. The said government has had to take over some very prominent financial firms, including AIG for $85 billion.

The money might not be there and Ford will have to find other ways to improve their financial standing. The main cause of their troubles that is within its control concerns the perceived reliability of their lineup and one of circumstances that are hurting sales. Customers buy trucks because they have capabilities that cars do not. If they are not reliable, they will purchase elsewhere. Ford’s trucks have the style and capabilities, but the perceived reliability is not there anymore. General Motors has, with limited success implemented a five year, 100,000 mile warranty on their new cars and trucks. Hyundai and Kia (Hyundai owns Kia) has a similar warranty on their vehicles.

Chrysler Group, as of this writing, owned by Cerberus offers a lifetime power train warranty on their vehicles to address real and perceived issues with their engines and transmissions on certain cars and trucks (the 2.7 liter V-6 in their Intrepid and Stratus models is still the bane of many consumers, including this writer who experienced an engine failure at 47,000 miles on his 2003 Intrepid).

A warranty will help in getting buyers into the showrooms skeptical about a vehicle’s reliability, especially when the vehicle is more capable than its more perceived reliable counterparts. The Toyota Tundra, Nissan Titan, Dodge Ram and Chevrolet Silverado, though good trucks, for example, may not have the positive visual impact that a 2008 or 2009 Ford F-150 has. This is a subjective matter, of course, but most would rather have a good looking car or truck over something visually controversial. The present F-150 was cited by J.D. Power to be a reliable truck.

Importance (Significance) of the Project:

Customers are the lifeblood of any business and this is an area in which Ford has been lacking as of late. Even the much touted Ford Flex, a crossover vehicle, has seen slow sales this year and has some people calling it a “hearse.” Ford has also had to delay the introduction of the newly styled 2009 F-150 to allow dealers to sell off the remaining 2008s. The auto industry in the United States in what is known by the public as the “big three” has besieged the Federal Government for loans of $50 billion dollars and scaled back to $25 billion as of late. This is still not a guarantee to date and the implications to Ford are enormous.

If they do not get this loan, they may be on the verge of bankruptcy and a major firm in the United States will have to close their doors. It will also mean lost jobs in areas that can ill afford to lose them. Michigan is a state besotted by high unemployment and lackluster economy even before the stock market lost nearly 700 points this week. The workers that depend on Ford for a paycheck will be hard-pressed to find new jobs should the worst case scenario arise. Investors stand to lose money if Ford goes bankrupt. If the government infuses money into the ailing automaker and it fails anyway, the taxpayers will have to pay for the loans.

Ford will have to increase their sales if they hope to stay a corporate entity, much less return to profitability. Time is of the essence and redesigning their lineup is going to be expensive. To complicate matters, this may not accomplish the objective. Similarly, the automaker is introducing the Eco Boost to help improve fuel economy in its fleet. However, it will only allow them to reduce the size of its engines without improving fuel economy across the board.

It may not improve sales for the amount of money spent either. Regardless, the firm owes it to its shareholders to turn a profit. Because the economy in Michigan is highly dependent on the auto industry, as is the United States, this is also a matter of national security. The federal government is debating whether or not to extend federal unemployment benefits beyond the standard length of time. Michigan has seen the highest unemployment rates in the nation for the past seven years. All of this has been a strain on state and federal budgets. The lack of tax revenue from job cuts and plant closings is something that governments on all levels are well aware of.

Ford needs to increase their sales in the interest of all of the stakeholders in their venture. The public has a stake in having the unemployment rate as low as it can. This means less unemployed to compete with in the job market. They also want a good, reliable and cost effective product for the money. The employees want to have a stable means of income and benefits to insure a fair standard of living, while shareholders want to maximize the value of their stock. Stockbrokers need something that is going to at hold and hopefully increase in value to sell. Outside suppliers, such as Lear Corporation want Ford to sell more vehicles because that means they will sell more interiors.

The governments need Ford to increase sales to see more tax revenue. This includes, but is not limited to, sales tax, income tax and even fuel taxes to improve roads. Even businesses such as grocery stores, bars, department stores, recreational vehicle dealerships, campgrounds, hotels and even home centers depend indirectly on firms such as Ford to provide income that allows them to hire more of their employees, provide benefits, and even in some cases, to stay in business.

Definitions

CUV stands for Crossover Utility Vehicle; another common term is simply “Crossover.” Typically a Crossover or CUV is a car-based vehicle that stands higher than a typical car, but is usually used as an updated term for station wagon or estate car. The main difference is that the CUV is a unitized body frame and the engines are usually smaller as a result. The fuel economy is about the same as an SUV.

Light truck is typically what most of think of when referring to a pickup truck of any size, a minivan, van or SUV.

Fuel consumption, rates of: typically called gas mileage.

SUV stands for Sport Utility Vehicle, a large, truck-based station wagon with a large engine that typically has lower fuel economy than a car. They usually have power sent to all four wheels, rather than to the front as in most cars, or the rear as in full-sized cars and light trucks.

SYNC, a voice activated mobile phone and digital music system offered on Ford Vehicles and developed as a joint venture with Ford and Microsoft.

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