Ford Motor Company

founded: 1903

Contact Information:

headquarters: the american rd.
dearborn, mi 48121 phone: (313)322-3000 fax: (313)323-2959 toll free: 800) 392-3673; (800) 232-5952 (tdd for the hearing impaired)

url: http://www.ford.com

OVERVIEW

One of the "big three" car companies in the United States, Ford has a rich history and heritage. Ford has been responsible for some of the largest contributions to the U.S. economy and its growth. Aside from its status as a car company, Ford also had considerable stakes in the financial services area. The company manufactures car parts and accessories in various divisions such as the Body and Assembly Operations, Casting Division, Climate Control Operations, Glass Division, Parts and Services Division, Plastics Products Division, and Transmission and Chassis Operations.

As late as 1997, Ford had impressive sales of $153.6 billion; it also ranked second on the Fortune 500 list of the largest U.S. industrial corporations based on sales, and it was the leading exporter of cars and trucks from the United States and Canada. But by 2002, company executives admitted that the company somehow had lost sight of its mission and goals with disastrous consequences. Somehow the company would find a way to return to years of profitability and to take itself from a $2 billion loss in 2001 to be again profitable by 2005, William Clay (Bill) Ford Jr., the company's newest CE0, promised stockholders. To help right the company, in 2002 he persuaded the retired and highly respected Allan Gilmour to return as chief financial officer. The company also showed it was serious about cutting losses when it not only unloaded several plants and cut loose 35,000 workers, but also axed such well-known but lately unprofitable models as the Lincoln Continental, Mercury Cougar and Ford Escort, replacing them with models aimed at younger buyers with expendable cash.

COMPANY FINANCES

As late as 1997, Ford's worldwide net income was $6.9 billion, a 56 percent increase from 1996. All that market share was soon gone, however, as were those in charge of the company as it declined. By 2001 Ford stock had dropped like a fallen chassis—some 33 percent from 2000. Burdened with heavy debt service, the company suffered Standard & Poor's "BBB+" rating—lowest since another dismal sales period in 1984. Among other disasters, four-door Ford Explorers equipped with Firestone tires were shown to have a problematic safety record with regard to rollovers, and even worse, the Insurance Institute for Highway Safety told the St. Petersburg Times in 2001 that 231 deaths occur in every 1-million two-door, two-wheel-drive Explorer Scouts. No turnaround was in sight by the first quarter of 2002 as Ford posted a disappointing loss of $800 million. While General Motors and Chrysler were showing small signs of recovery in 2002, Ford just couldn't seem to buy a better idea to reverse its ghastly tailspin. "We absolutely must make money on everything we sell," Bill Ford told the Bloomberg News. "We just have to hit a lot of singles and hope they turn into home runs." In 2002 Bill Ford literally stepped to the plate, filming a series of commercials that emphasized Ford tradition and his family's insistence on giving good value to car owners. Analysts warned that putting CEOs on television was risky business, capable of winning viewers hearts as Wendy's Dave Thomas did before his death, or performing miserably.

ANALYSTS' OPINIONS

Ford executives in the 2000s seem to delight in giving their critics the ammunition required to shoot them. In 2000 Ford announced that it was going to develop a gas-saving SUV, but by 2002, analysts pointed out that Ford SUVs were delivering way below the 23 mpg performances the company had promised. In 2002 chairman Bill Ford admitted that the company's goals had not been met, but that technology was on the way for an environmentally friendlier Ford SUV. Nonetheless, analysts expressed far higher expectations for the company's forthcoming (2003) gasoline-electric Escape HEV—marketed to hip, environmentally conscious buyers—and engineered to deliver 40 mpg in combined city/highway road performance. Can the company extricate itself from the reef where it has run aground? Michael Bruynesteyn, a Prudential Securities Inc. analyst, told the Bloomberg News that it can. "I believe Ford can improve its earnings by cutting costs and getting more flexible, but this isn't something that happens over-night," says Bruynesteyn. "It will take years." Many analysts are predicting that Ford will need to sell assets such as Hertz, the rental car company, to get operating capital and to shrink killing debt service.

HISTORY

Born July 30, 1863, on a farm near Dearborn, Michigan, Henry Ford made his first rudimentary car, the Quadricycle, in a shed behind his home. Ford formed one company that folded, and for a time his main interest was racing cars, including one driven by Barney Oldfield that set a then-speed record. With $28,000 and a lot of faith and courage, Henry Ford and 12 associates incorporated the Ford Motor Company in 1903 in Lansing, Michigan. Between 1903 and 1908, Henry Ford and his engineers used the first 19 letters of the alphabet to designate their creations, although many of these cars were experimental and never reached the public. Ironically, Ford had very little school learning and was only marginally literate.

FAST FACTS: About Ford Motor Company

Ownership: The Ford Motor Company is a publicly held company traded on the New York Stock Exchange.

Ticker symbol: F

Officers: William Clay (Bill) Ford Jr., CEO, 45; Carl Reichardt, VChmn., 69; Allan Gilmour, CFO, 67

Employees: 345,000

Principal Subsidiary Companies: Ford Motor Company has many subsidiaries—some of the better known are Ford Motor Credit Co., Hertz Corp., Lincoln Mercury Division, and Jaguar Ltd.

Chief Competitors: As a major automobile manufacturer, Ford's competitors include DaimlerChrysler, General Motors, Toyota, Honda, BMW, Mitsubishi, Nissan, Hyundai, Kia, and Volkswagen.

The first production Ford car, the Model A, was sold a month after its incorporation to a Chicago dentist named Pfennig. By this time, the company's bank balance had dwindled to $223.65. During the next five years, Henry Ford graduated from being chief engineer to president, acquired a majority of the stock, and directed a development and production program that began in a converted wagon factory. In the first 15 months, 1,700 Model A cars chugged out of the old wagon factory.

By the year 1913, Ford had embarked on establishing the world's first moving automobile assembly line production operation (it was fully operational by 1917) and began sales operations in Argentina, China, Indonesia, Siam (now called Thailand), and Brazil. By 1915 Ford had built 1 million cars, and by 1922 that number had reached 10 million. Ford production reached 20 million, and the company built its first V-8 automobile in 1931. A new line, Mercury, was introduced in 1938, and the Lincoln Continental was introduced the same year. However, at the start of WWII, Ford was forced to halt civilian production and shift to total military production. By the time the WWII ended, Henry Ford died at the age of 83, in 1947. However, his mental health had been destroyed by a stroke many years before his end came, and at the end, suffering hallucinations and allowing thugs to beat union organizers, he was removed from control before he could destroy his own company with bad management.

Henry Ford II, the oldest grandson of Henry Ford assumed presidency of the company in 1945. As he drove the first post-war car off the assembly line, Henry Ford II made plans to reorganize and decentralize the company. At the time, Ford Motor Company was losing several million dollars a month, in large part because the obdurate Henry Ford had lost touch with the car-buying public, and the company was in a critical condition to resume its pre-position as a major force in the now fiercely competitive auto industry.

Henry Ford II turned out to be the ideal individual to tackle the job of leading the family business to becoming a modern, publicly owned corporation. His genius was in his ability to find talented people such as Lee Iacocca and Robert McNamara, and put them into leadership positions. Those hired by Henry Ford II brought quantitative analysis and the science of modern management to the company, something that had been absolutely lacking under Ford who, the last 30 years of his life, had turned into an autocratic, uncompromising, bully.

CHRONOLOGY:

1903:

Henry Ford establishes the Ford Motor Company

1908:

Ford introduces the Model T

1909:

Henry Ford applies his assembly line concept to Model T production

1918:

Henry Ford retires, naming his son, Edsel Ford, as president

1919:

Edsel and Henry Ford buy out the other stockholders and incorporate

1922:

Acquires the Lincoln Motor Company

1937:

Ford produces its 25-millionth automobile

1943:

Edsel Ford dies

1945:

Henry Ford II is named president

1949:

Henry Ford I dies

1956:

Ford Motor Company goes public

1958:

The Ford Edsel debuts with a prominent grille and flops horribly

1962:

The Mustang debuts and sells 500,000 in 18 months

1979:

Henry Ford II relinquishes his position to Philip Caldwell

1986:

Ford's income passes General Motors' for the first time since 1924

1993:

Ford products are five of the top eight bestselling vehicles in the United States

1999:

All Ford sport utility vehicles are manufactured as low-emission vehicles

2000:

With adverse publicity from deaths from SUV rollovers, and severe management problems, Ford stock value begins to plunge

2001:

Company begins extensive shakeup at the top with Bill Ford taking control of the company, restoring Ford to management by a descendent of the founder; numerous other executives are replaced and 35,000 employees were scheduled for layoffs; Bill Ford makes it clear that members of the Ford family are going to have a huge say in company policy as he names cousin Elena Ford, granddaughter of Henry Ford II, group manager of the Lincoln Mercury division

2002:

Struggling Ford axes 22,000 employees in attempt to turnaround struggling company; 13,000 more employees will lose jobs eventually; Ford announced that it is ending some of its best-known but lately poorest-selling models: the Ford Escort sedan, Mercury Cougar, Mercury Villager, and Lincoln Continental

2003:

Ford celebrates its centennial year

In 1956 the Ford Motor Company took a major step and went public. In the largest stock issue of all time, 10,200,000 shares of the Ford Motor Company were put up for sale and 250,000 investors rushed to pay $657 million for 20 percent of what, until then, had been a family business. In 1958 Ford announced its entry into the heavy and extra-heavy truck market (it had entered the light truck market in 1917), and by 1959, Ford had produced 50 million vehicles.

STRATEGY

Ford started as a domestic company and capitalized on domestic demand. However, this did not detract from the company's focus on globalization. Henry Ford's policy was to become a contributing citizen in every country where Ford sold cars. His slogan was, "Build them where you sell them." In the same vein, Ford believed in equal employment opportunity throughout his company. However, unable or unwilling to accept change, Henry Ford's reluctance to upgrade the Model T, and to add improvements desired by customers, allowed Chevrolet and other brands to outdistance Ford models in the late 1920s and 1930s.

Henry Ford II, by many accounts a wise and prudent company head, continued his grandfather's equal employment policies, predating federal civil rights legislation. In the late 1970s, when American workers were criticized for producing poor quality, Henry Ford II said, "there is no such thing as a bad employee, only bad managers." Company leadership accepted responsibility, and Ford was the first American auto company to make quality "Ford's number one operating priority."

Ford continued to believe in improving quality via its employees, as opposed to the rest of the industry, which was moving on to the use of high-tech robots. "Teamwork" became the norm from in-plant participa-tory groups to a new way of developing cars based on cross-functional teams. The idea was to bring in representatives from all engineering and management specialties together into each vehicle development team, then give them the authority to make as many decisions as possible. The first team effort was on a bold new car—the Taurus—off the assembly line in 1986. The immensely successful effort encouraged management to give the teams more authority and independence. "Have you driven a Ford—lately?" became the advertising battle cry of the 1980s for the company.

In efforts to increase profitability, Ford continued restructuring its business and reducing process costs. The company discontinued low-volume, low-profit vehicles such as the Aerostar, Aspire, and Probe; sold its heavy truck operations; reduced excess car capacity; and added capacity for its best-selling light trucks. In 1997 Ford announced financial goals for its automotive business, including targeting a return on sales of 4 percent in North America; in Europe, they hoped to break even; in South America, the company sought reduction in losses compared with 1996. Overall, Ford hoped to reduce total costs by $1 billion and reduce capital spending. The company was able to exceed all of those goals, as stated in its 1997 Annual Report.

All that success was gone and forgotten in just five years. By 2002 the company's latest strategy was clearly to survive first and then to find ways to prosper. The company used the approaching centennial to remind American automobile buyers that Henry Ford, from the early 1900s to the 1920s, was regarded as an American inventive genius, and that the Ford automobile was inextricably linked to America's past. In addition to advertising campaigns that were a mixture of history and sentiment, the company reaffirmed its commitment to providing quality and value. Dead last in new-owner satisfaction in 2001, according to J.D. Power & Associates' annual poll, Ford Motor Company improved greatly in 2002 under new management, which aggressively worked to meet concerns of new car buyers. The result has been that Ford customer satisfaction in 2002 increased dramatically, according to the latest Power & Associates ranking, although the company still was well behind frontrunner Toyota.

For all the hype on television and Internet ads about Ford's American traditions, the company clearly was becoming, or had already become, a truly international maker of cars. Bumper stickers on Ford automobiles in the company's manufacturing plants in Ohio and Michigan still urge readers to "Buy American," but the Ford products Americans now bought increasingly were becoming about as American as chopsticks and curry. The company long has owned a one-third interest in the Japanese car corporation Mazda, and production plans for the Taurus are to incorporate some of the Mazda features buyers seem to prefer, according to Forbes magazine. With Ford brands such as the Focus almost 100 percent a European-featured car, it likely is only a matter of time before wholly-American engineered cars such as the Mustang, Crown Victoria, and Lincoln Town Car either succumb to European influences and market preferences or go out of production.

INFLUENCES

Since its beginning, world events have shaped Ford Motor Company and played a role in the company's prominence and growth. Also important was the influence of Henry Ford in the pre-1930s period, and the influence of his oldest grandson, Henry Ford II in the post-World War II war period. The success of the Ford Motor Company post-World War II was in the fact that Ford grew and adapted to the changing times, while at the same time anticipating industry events and setting trends and milestones of its own.

In the 1960s, for instance, Ford leaders anticipated a weakening of trade barriers and moved to regional trading way ahead of the pack. Ford of Europe was established in 1967, some 20 years ahead of the European Economic Community's arrival. Similarly, Ford established the North American Automotive Operations (NAAO) consolidating the United States, Canada, and Mexico in 1972, more than a decade ahead of the North American Free Trade Agreement (NAFTA).

CURRENT TRENDS

In 1994, with the consolidation of Ford's North American and European operations, Ford 2000 was initiated. The Ford 2000 commitment was to bring the entire Ford global organization into a single operation by the year 2000. Ford 2000 created a single global management team to allow the company to eliminate duplication, initiate best practices, use common components and designs for the advantage of scale, and allocate resources to wherever they are needed to best serve market needs.

Ford expected to save billions with the Ford 2000 initiative, but Ford's profit margins fell 60 percent during the 1994-1996 phase because of tough competition, a failure to standardize enough parts, and design flaws in vehicles such as the Explorer. With heavy competition from foreign and other domestic auto makers in the mid-1990s, Ford went through a difficult period trying to remain profitable. New product introductions and aggressive marketing were results of this effort. In February 1997, Ford announced its decision to quit the heavy truck business after launching the much-publicized HN80 model introduced in fall 1996; this move reflected the importance that Ford executives placed in a company-wide strategic review. "Industry analysts said that Ford's decision to drop out of the heavy truck business recognizes it wouldn't easily have caught the market leaders," according to the Knight Ridder/Tribune Business News.

In another move expected to improve performance, Ford moved its Lincoln-Mercury headquarters to Irvine, California, in 1998. Ford hoped that southern California's "innovative, trend-setting culture and strong automotive market will foster development of unique vehicles and creative new looks for both brands." But by 2002, as the Lincoln Continental and several Mercury models were discontinued, it became clear that Ford needed to find ways to sell the Lincoln and Mercury brands to the buying public or these two would join Oldsmobile in oblivion.

PRODUCTS

Ford has always been a trend setter with its new products. In 1904, Henry Ford, a major racing car enthusiast and early builder, set the first speed record with his "999" race car traveling 91.37 miles per hour on frozen Lake St. Clair, near Detroit, Michigan. Ford introduced the first V-8 engine. In the fall of 1954, the Thunderbird, an American classic, joined the Ford car family as a 1955 two-seater sports car. The original Thunderbird was offered with a 160-horsepower V-8 engine with a three-speed manual transmission and had a new and unique feature—a convertible canvas roof for fair and sunny weather and a detachable plastic hardtop for foul weather. In 2002 the redesigned Thunderbird went back to some of the design features that had made the car so treasured in the 1950s.

Ford changed the direction of the American auto industry forever on April 17, 1964, when it unveiled the Mustang at the World's Fair in New York. The Ford Mus-tang, a personal favorite of Lee Iacocca, caused a sensation that confirmed the theories of Ford product planners who thought a car with a youthful touch would appeal to baby boomers ready to purchase their first car. Dealers were swamped with 22,000 orders the car's first day.

In 1980 Ford introduced the 1981 Escort in its first attempt at a world car, but by 2002, that model's defects and dwindling sales had caused the company to halt production. CDW27 was Ford's genuine global car. Named "Mondeo" in Europe, Taiwan, and the Middle East, slightly modified versions went on sale in North America with the names Ford Contour and Mercury Mystique. Ford's CDW27 became a new way of thinking about product development for the Ford Motor Company. It proved that true globalization was possible and that customer focused teams were the way of the competitive future. Runaway successes during the 1990s included the company's sports utility vehicles, save for serious safety defects, and the F-series pick-ups. The F-series pick-ups outsold any other car in the world during the 1980s and 1990s. In the late 1990s and early 2000s, Ford sold cars under the brands Ford, Lincoln, Mercury, Aston Martin, and Jaguar, but it also held a third interest in Japanese Mazda.

CORPORATE CITIZENSHIP

Ford announced that beginning with 1999 model year cars, all of its sport utility vehicles (SUVs) would be low-emission vehicles, as clean as new cars, but that promise backfired as it was unable to deliver on that promise even as late as 2002. Ford was the first large company in the world to commit globally to ISO 14001 certification, the international environmental management system standard covering all of a factory's environmental efforts, such as energy use, water treatment, waste disposal, and air quality. In the United Kingdom, Ford's Bridgend Engine Plant just began operating the largest solar power installation at any manufacturing site in Europe. Over a 30-year period, its solar panels were expected to reduce the amount of carbon dioxide emitted at the plant by more than 4,000 tons. In 2002 Ford began its campaign to match Honda and other forward-looking manufacturers in the production of energy-saving hybrid cars.

GLOBAL PRESENCE

While Ford was growing domestically, parallel growth was occurring as part of a foreign expansion program that began in 1904, a year after the company was formed. On August 17, 1904, Ford Motor Company of Canada was formed in the small town of Walkerville, Ontario. From this small beginning grew a large overseas organization of manufacturing plants, assembly plants, parts depots, and dealers. In 2002, Ford was represented in some 200 countries and territories around the world.

Markets Ford targeted during in the twenty-first century included Asia, where the company saw great long-term growth opportunities despite the area's economic turmoil. They aimed for 10 percent market share by 2007. Also as part of its Asian expansion, Ford began manufacturing the Ford Transit in Belarus, China, Malaysia, and Vietnam. The company was also expanding manufacturing opportunities and investing in areas like central and eastern Europe and South America.

CAN HISTORY REPEAT ITSELF?

In 1945, Henry Ford II, with the government's blessing, left the Armed Forces to take on the unenviable job of trying to rejuvenate the company his famous namesake father had run into the ground and which had produced vehicles for the war effort much of the 1940s. In the 2000s, with the Ford Motor Company unwillingly seeming to be following Oldsmobile into industry extinction, the task of rebuilding faltering Ford is in the hands of William (Bill) Ford—a youthful, perhaps hyperactive man in his early forties with a love of the martial arts, fly fishing, and the environment. His takeover of the company was tantamount to a coup, as he replaced nearly the entire upper tier of company management with his own players. He raised eyebrows by appointing a cousin to head the Mercury brand and by convincing Allan Gilmour, a retired onetime Ford exec nicknamed the "Whiz Kid," to return as chief financial officer.

Just as his famous ancestor Henry Ford had craved the center stage, so too has Bill Ford thrust himself into international recognition seemingly overnight as his face graced Ford's 2002 print and broadcast advertisements. While proud of his family's history, Ford, according to the Bloomberg News, doesn't take the family name so seriously that he cannot make small jokes about it. Well educated, holder of an undergraduate degree in history from Princeton University and a graduate degree in business from Massachusetts Institute of Technology, he has always had the image of a strong environmentalist until 2002 when he very visibly fought attempts by activists and politicians to put fuel economy regulations into law, according to the Bloomberg News. In 2002 Bill Ford shows every indication of being as ruthless as old Henry Ford himself, cutting lose Ford executives with decades of service who offer either an opposition or threat. The idealism of his youth, manifested in pro-environmental action and statements, has been thrown alongside the road as he's come to realize Ford Motor Company is in too precarious a position in the 2000s to become a poster company for Audubon and other environmental groups. Old Henry Ford, ultimately, became nearly the ruin of his own company and was ousted by his own family. Most analysts say that Bill Ford has until about 2005 to stand and deliver the turnabout in company fortunes he has promised, or he will have the same fate.

EMPLOYMENT

Ford values diversity in its employees and states that "Our global workforce is a competitive strength." The company believes that diversity in its workforce helps it better understand and serve customers. Once hired, the company strives to educate and develop its employees. The company's overall goal was for each employee to receive at least 40 hours of training each year.

SOURCES OF INFORMATION

Bibliography

evanoff, ted. "ford to exit heavy truck business." knight-ridder/tribune business news, 20 february 1997.

fitzgerald, alison. "toyota tops quality poll; general motors, ford rise." bloomberg news, 30 may 2002.

"ford motor company." hoovers online, 2002. available at http://www.hoovers.com.

ford motor company annual report 2001. ford motor company, 2001.

ford motor company web site, 3 june 2002. available at http://www.ford.com.

"improving automotive operations drive ford to record first quarter earnings of $1.7 billion, up 15%." ford motor company press release, 16 april 1998.

international directory of company histories. vol. 11. detroit, mi: st. james press, 1995.

koenig, bill. "ford paid former ceo nasser $17.9 million in 2001." bloomberg news, 9 april 2002.

——. "ford ceo cuts workers, shuts plants to staunch losses." bloomberg news, 17 january 2002.

kumar, anita. " ford leaves 2-door suv unchanged." st. petersburg times, 29 july 2001.

lippert, john. " ford leaves 2-door suv unchanged." bloomberg news, 31 may 2002.

row, christopher, and tim burt. " new finance chief signals further ford restructuring." financial times (london), 21 may 2002.

taylor, alex. "the gentlemen at ford are kicking butt." fortune, 22 june 1998.

turrettini, john. " bye-bye, american car." forbes, 27 may 2002.

For an annual report:

write: ford motor company, shareholder relations, the american road, po box 1899, dearborn, mi 48121-1899

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. ford motor company's primary sics are:

3711 motor vehicles and car bodies

3714 motor vehicle parts and accessories

6035 savings institutions, federal chartered

6141 personal credit institutions

6159 miscellaneous business credit institutions

6331 fire, marine, and casualty insurance

7515 passenger car leasing

also investigate companies by their north american industry classification system codes, also known as naics codes. ford motor company's primary naics codes are:

327211 flat glass manufacturing

333924 industrial truck, tractor, trailer and stacker machinery manufacturing

336111 automobile manufacturing

336211 motor vehicle body manufacturing

336399 all other motor vehicle parts manufacturing

522298 all other non-depository credit intermediation