Ford Motor Company: Implementing the 'One Ford' Strategy

            
 
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Case Details:

Case Code : BSTR423
Case Length : 18 Pages
Period : 2006-2012
Pub Date : 2013
Teaching Note :Not Available
Organization : Ford Motor Company
Industry : Automotive
Countries : US; Global

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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

The 1990s

The early 1990s was a tough period for Ford, as it was for the rest of the auto industry. In 1991, Ford's worldwide automotive operations incurred a loss of $3.2 billion. The company's automotive losses in the US alone amounted to $2.3 billion . This was a significant blow to the company and quite unexpected too as it was only in 1989 that it had earned $3.3 billion in net income. However, the silver lining for Ford was that it had accumulated around $115 billion in banking-related assets. The financial figures for 1991 would have looked a lot worse if the company had not diversified into the financial services sector. For the year, Ford's financial services group recorded $927 million in earnings...

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The Early 2000s

In the early part of the 21st century, Ford took several steps with the aim of strengthening its competitiveness. It spun off its Visteon unit, acquired BMW's Land Rover SUV business, and upped its stake in Hertz . However, one unexpected event was to adversely impact its financial health - the recall of over 6.5 million Firestone brand tires. These tires were used as original equipment on the Ford Explorer, the Mercury Mountaineer, the Ranger, and some of its F-150 pickups. In what was then the largest recall in automotive history, Ford was compelled to call back over 300,000 vehicles and replace over 13 million Firestone tires at a cost of $3.5 billion . In 2001, the company incurred a loss of $5.45 billion. Nasser was asked to step down late that year, leaving William Clay Ford, Jr., in charge. Amid cut-throat competition, sluggish sales, low employee morale, and quality issues, Ford Jr. had his work cut out to revive the company...

The 'One Ford' Strategy

In September 2006, Alan Mulally was appointed CEO of Ford. Soon after, he unveiled the 'One Ford' strategy in an effort to stimulate growth.

ONE TEAM

The first component of the 'One Ford' strategy concerned people. It recognized the importance of a skilled and motivated workforce working together as a team. The company planned to develop a winning team by putting in place the principles and practices that would unlock the full potential of its employees. To start with, all employees who were connected to a project were to be included in the decision making process. While work was to be assigned to teams, individuals were to be given authority and held accountable for delivering results....

ONE PLAN

The second component of the strategy was a single plan for the entire global enterprise, with unambiguous performance goals. Traditionally, Ford's regional operations operated as autonomous business units. While many of these units had been successful, it was felt that this mode of operation was too inefficient and would not be sustainable in the long run. The 'One Plan' involved replacing disparate units with a single, unified entity...

Implementing the Strategy

Ford set out to implement the 'One Ford' strategy. Its initial focus was on securing financing as this was vital for the restructuring efforts.

SECURING THE FINANCING

In December 2006, Ford secured $23.5 billion of new liquidity. In addition, the company obtained a convertible debt of $4.95 billion, a secured term loan of $7 billion, and a secured revolving credit facility of $11.5 billion. This amounted to total automotive liquidity of about $46 billion at year-end 2006. The company intended to utilize this liquidity to fund the restructuring and product development initiatives. It was also to act as a cushion for unforeseen events in the near term...

RESTRUCTURING THE COMPANY

As part of the 'One Ford' strategy, the company initiated a restructuring exercise of its automotive business with the objective of dealing with the realities of lower demand, higher fuel prices, and changing consumer tastes. On September 15, 2006, the company announced that it would accelerate the 'Way Forward' plan that the company had announced at the beginning of the year. This was expected to further bring down annual operating costs by approximately $5 billion by 2008 (compared to 2005) and quicken the flow of new products...

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