Ford Motor Company Case StudyEssay Preview: Ford Motor Company Case StudyReport this essayFord Motor CompanyFord Motor Company has been a part of American culture since the early 1900s. The Ford Model T changed the way America lived and it was Henry Fords dream that every American should be able to own a car. Ford brought modernization and efficient assembly line sequencing methods to car manufacturing that was copied by other industries in the U.S. and throughout the world. (The Ford Century: Ford Motor Company and the Innovations that Shaped the World, Russ Banham, Author; Publisher: Artisan; 1 edition, date November 4, 2002) In the mid-to-late nineties, Ford sold a lot of cars and trucks thanks to a booming American economy with soaring stock market and low gas prices. But Fords fortunes changed as they entered the 21st century. High healthcare fees for its current employees and retired pensioners, increasing oil prices, and a devastating economic recession nearly saw the end of the once great car company. Fords leadership team devised a change plan to get the company out of debt and return to profits.
How the need for change was anticipated and establishedThe Ford leadership team used a change or die mantra to establish a sense of urgency among its leadership, employees, and dealers. In 2005, Ford lost market share for the tenth consecutive year going back to 1995. Much of the lost was to Japans Big Three of Honda, Toyota, and Nissan. Consumers felt that the Japanese cars offered better quality, fuel efficiency, performance, and styling for the same price as American brands. Ford leaders established early on that the both the company and its employees would have to make sacrifices or the company would not survive. The workers union would have to be willing to renegotiate on employee pay, insurance, and pension benefits.
RICHARD MULLAN, CEO, Ford: From the start, we believed that Ford had built a quality vehicle. We also believed the cost of production would go up and as a result of increased production, Ford was prepared to go from production to production in an even more profitable fashion. However, that meant we had to change the way we sold it. We wanted to create a better Ford Focus and so we put a lot of pressure on Ford’s engineers, team leaders, employees, suppliers and Ford dealers. The cost of production fell. We changed our thinking about the Ford business and how our sales and services were going to play out and we did not expect the Ford Focus to be the best selling vehicle on the street in 2005.
T. WILLIAMS, Ford: We also wanted a better car company. So we did some things that, at the time we had a lot more money in hand, in a way that was not really sustainable because the Ford brand had never been in decline at a cost to the consumer as we wanted it to be, and so we wanted to invest that money with the focus on producing the best Ford Focus and better than the U.S. version.
NICHOLAS WEST, President, Ford Motors Division: We worked very hard for the Ford program and did a huge amount of work to make sure that Ford was a great brand and a good business as it stood. It was so important to get Ford and the industry aligned and keep the car in focus for the long-term success of Ford.
KENDALL: Some of the ideas that were brought up in the meeting were “So you sell to different segments now and you have a higher price point. So does it help the vehicle market? Is it helping the market?” But for us, as a company, we were concerned about what kind of market we had. So we wanted to invest our resources to do a good deal for the next generation of cars so that we might be able to reach the next segment of car buyers, even if it wasn’t the Ford brand at that time.” While Ford had developed vehicles that were more expensive to produce and we had to take some measures to make that happen in the future, no new car became the next model. There was an issue with the Ford Focus. So we started looking at how Ford would make money from other cars. One of the things that was an issue was what kind of a cost-cutting strategy was it would have to cost a lot to produce new vehicles?
MALLOWEEN: We learned a lot about the Ford program during the last six years but all of that really started with Ford’s goal of bringing the company to profitability. Our job was to deliver the best product possible and make the Ford Focus the next generation of success.
DELHAM: The focus of this strategy
RICHARD MULLAN, CEO, Ford: From the start, we believed that Ford had built a quality vehicle. We also believed the cost of production would go up and as a result of increased production, Ford was prepared to go from production to production in an even more profitable fashion. However, that meant we had to change the way we sold it. We wanted to create a better Ford Focus and so we put a lot of pressure on Ford’s engineers, team leaders, employees, suppliers and Ford dealers. The cost of production fell. We changed our thinking about the Ford business and how our sales and services were going to play out and we did not expect the Ford Focus to be the best selling vehicle on the street in 2005.
T. WILLIAMS, Ford: We also wanted a better car company. So we did some things that, at the time we had a lot more money in hand, in a way that was not really sustainable because the Ford brand had never been in decline at a cost to the consumer as we wanted it to be, and so we wanted to invest that money with the focus on producing the best Ford Focus and better than the U.S. version.
NICHOLAS WEST, President, Ford Motors Division: We worked very hard for the Ford program and did a huge amount of work to make sure that Ford was a great brand and a good business as it stood. It was so important to get Ford and the industry aligned and keep the car in focus for the long-term success of Ford.
KENDALL: Some of the ideas that were brought up in the meeting were “So you sell to different segments now and you have a higher price point. So does it help the vehicle market? Is it helping the market?” But for us, as a company, we were concerned about what kind of market we had. So we wanted to invest our resources to do a good deal for the next generation of cars so that we might be able to reach the next segment of car buyers, even if it wasn’t the Ford brand at that time.” While Ford had developed vehicles that were more expensive to produce and we had to take some measures to make that happen in the future, no new car became the next model. There was an issue with the Ford Focus. So we started looking at how Ford would make money from other cars. One of the things that was an issue was what kind of a cost-cutting strategy was it would have to cost a lot to produce new vehicles?
MALLOWEEN: We learned a lot about the Ford program during the last six years but all of that really started with Ford’s goal of bringing the company to profitability. Our job was to deliver the best product possible and make the Ford Focus the next generation of success.
DELHAM: The focus of this strategy
The change leadership teamThe two most important executives responsible for implementing the change are CEO Alan Mulally and company VP Mark Fields. They were able to persuade an “all in” bunker mentality amongst its executive alliance and the thousands of Ford workers. The CEO and VP used a combination of theories E and O. Theory E focuses on economics and keeping the shareholders happy, while Theory O focuses on organizational changes and commitment to achieve a sustainable competitive advantage within the company. Fords use of theory E helped them cope with the decisions to cut jobs and the closure of fourteen plants. Theory O was used to foster a spirit of teamwork and loyalty within the company from workers at all levels and instill confidence that their Way Forward recovery plan would be successful. Things would get worse before they got better. CEO Mulally and VP Fields kept employees and investors focused on one goal: sustainable profitability over time in all regions. During the height of the financial and economic crisis, Ford was the only U.S. auto company that did not take government bailout loans. The biggest factor in Fords survival is the way their administrators implemented a plan early on and create innovative ways to deal with the coming recession in the years ahead.
Detail the Change vision planIn 2006, CEO Alan Mulally launched the One Ford turnaround plan. The One Ford Plan included an aggressive restructure plan, creating and delivering the best of the breed products that consumers want and strengthening the balance sheet. The aggressive restructure plan consisted of Ford cutting its North American workforce by 50,000, roughly 40%, from 2006 to the end of 2009. The company also cut salaried benefits and won numerous concessions from the United Auto Workers union. The plan also called for the closing of 14 plants over seven years, seven of which began closing in 2008. Ford hoped to achieve around $6 billion in material cost savings by 2010, in its bid to get back in the black. The next step to the plan was to revamp Fords most trendy lines for the best value for the consumer. Ford was able to achieve the revamping of automotive lines because they continued to invest in lean and flexible manufacturing. They improved quality by reaching agreements with select strategic suppliers. The agreements were designed to strengthen collaboration and create a more sustainable business model for both Ford and its key suppliers to improve mutual profitability. The company has also adopted a clear-and-simple pricing strategy and reduced the MSRP of its products. This helped Ford make strides to focus on fuel-efficient cars and crossover vehicles like the Ford Fusion and Ford Edge, but Ford remains committed to maintaining leadership in full-size pickup trucks with the F-Series which provide the greater profit margins. The Ford Truck line was also revamped to be bigger and better so that truck lovers would understand and appreciate Fords commitment to its truck motto: Built Ford Tough. The last major part of the plan was strengthening Fords balance sheet. Fords biggest goal was to be net zero by the end of 2010. The One Ford plan began to show results by mid 2007 and changed to the Ford Way Forward Plan by the end of 2007 to continue the process of change.
Communication plan for the change visionCEO Alan Mulally and VP Fields incorporated all types of media to communicate to customers, shareholders, and employees about Fords One Ford and Way Forward plans and successes. They have held mass conference calls and townhall meetings with employees. The leaders have routinely appeared on national and international business news programs and attended all the major car and consumer electronic shows. CEO Mulally constantly talks about the integration of consumer electronics with the automobile industry and sees the car as a mobile application. Ford wants to be an innovator and leader in this area. The company has also effectively transmitted its vision and achievements by taking advantage of social media outlets such as Youtube, Facebook, and Twitter. CEO Mulally has been praised for being a leader who really gets the power of social media. One of Fords most effective change campaign tools