BOK MATRIX

Introduction

Ford motor company is an American multinational automaker which was established by Henry

Ford and 11 associate investors in 1903 with its headquarters at Dearborn, Michigan. It is the

world’s fifth largest automobile manufacturer by production volume providing employment to

more than 177000 employees and 65 plants worldwide. It is one of the listed companies in US

stock exchange. It manufactures and distributes automobiles in approximately 200 markets

across 6 continents. Ford was the only US car company that did not need the government bailout

and it was first to get the investment status back.

It has vested its operations worldwide. It operates in 2 sectors – Automotive and Financial

services. The company is indulged in selling automobiles and commercial vehicles under the

brand name “ford” and the most luxury cars under the brand name “Lincoln.” The company is

firmly committed to the transformation and success of Lincoln brand. The company provides

financial service which includes holding companies and real estate’s through “ford motor credit

company.” The Ford credit segment provides vehicle related financing, leasing and insurance

through the company’s wholly owned subsidiary Ford Motor Credit Company, LLC. In 1916,

55 percent of all cars were Ford models T’s. In 1993, five of eight bestselling vehicles in US

were Fords. In addition to this, the company saw its total revenue soar to $107 billion in 2001.

Financial Analysis

The financial statement of the company is in accordance with US Generally Accepted

Accounting Principles (GAAP). The company ensure compliance with Ford’s legal requirements

and ISO certification process relating to the documents. Ford was the first international

company which was exporting cars to Europe within 3 years of its founding. Ford markets its

products through retail dealers and distributors in and outside the North America. During the FY

2007, the automobile division of Ford recorded revenues of $154379 million. The total cost and

expenses came around $121.6 billion in 2012. By the end of December 2012, the company

proved to be a great source of selling automobiles as it sold around 5668000 vehicles at

wholesale worldwide.

The market share of the company increased sequentially at each quarter during 2012. According

to the recent data analyzed, the sales jumped to 4.6% to more than 115000 units, creating the

fourth successive month of sales growth. The entry by Ford into developing countries like India

and China was hindered by traditional measures such as tariffs and subsidies. However, China

and India are leading in the run of selling Ford vehicles. The Chinese and the Latin American

markets are crucial to the Ford’s long term strategy.

In 1908, Ford introduced Model T, which became one of the most popular cars in the world. In

1988, the company’s worldwide earning came to around $5.3 billion, the highest of any auto

company till date. In 1911, Ford opened its first overseas factory in Manchester, England. Ford

enjoyed a leading role within the market it had effectively created until Toyota exported its first

automobile in 1956 to US. The US market share decreased from 25% to 15% from 1997-2007. In

2000, the company has to face a major loss of reputation. The company faced a tremendous

downward trend. The equity valuation felled drastically whereas the Ford stock was traded $14

per share in 2005. It focused its efforts on selling SUVs and Pickups for decades and left the

growing segments of small and medium sized car to its foreign competitors. The company

reported the worst loss amounting to US $12.7 billion in fiscal year 2006 in the company’s

history. However, the company plays a dominant role in financing dealership purchase of real

estate and other larger capital expenditures by the company and its affiliates. Alan Mullaley

adopted restructuring process to compensate the loss.

The restructuring process recorded revenues of around $172,455 million in 2007. Since 2006,

Ford has improved the fuel economy of US vehicles by 16.8%. Almost 40% of vehicles sold by

Ford and its management within US were financed by Ford credit in 2008. By 2009, the sales

increased by 73%. Over the first half of 2010, Ford sold 301524 units. It gained the market share

effectively. Ford sales in US were up 14.3% in 2011 compared to 2010. In 2011, more than 80

percent of Ford’s growth came from small cars and SUVs. According to Ford press release, it

grew its sales by 46% in 2012.

The company reflected growth in nearly every aspect of the business with 25 new vehicles

launched around the world in the year 2012. By 2013, Ford hybrid sales increased over 100%.

Within Europe, Ford had the threat from its competitors including Volkswagen, Renault, GM,

Fiat and PSA. The company had sold around 2.3 million vehicles in the US in the recent year.

Ford experienced much greater success and has managed to remain competitive in Europe by

designing cars according to the tastes and choices of the people and trend and by increasing the

quality ratings of its vehicles. This helped the company to stabilize their market share and profits

and to gain customer satisfaction at utmost level.

Trend Analysis

2012 2011 2010

Revenue 134,252.00 136,264.00 128,954.00

Cost of Revenue 115,693.00 116,959.00 108,796.00

Operating Expense 127,975.00 128,632.00 121,472.00

Operating Income 6,277.00 7,632.00 7,482.00

Net Income 5,665.00 6,372.00 6,561.00

Current Assets 126,228.00 120,905.00 120,801.00

Total Assets 190,554.00 178,348.00 164,687.00

Current Liabilities 76,928.00 76,494.00 78,854.00

Total Liabilities 174,243.00 163,277.00 165,329.00

Total Equity 16,311.00 15,071.00 - 642.00

Cash from Operations 9,045.00 9,784.00 11,477.00

Cash from Investing - 14,290.00 - 3,041.00 6,908.00

Cash from Financing 3,705.00 - 4,241.00 - 24,421.00

Looking at the trend analysis, it can be said that the company has higher costs of revenues

whereby maximum of the revenue is attributed to the cost of sales. This leaves no space for the

company to spend on the selling and promotion costs whereby they can achieve maximum

utilization in the way of gaining customers. The operating income has been lower in the current

year due to higher costs and lower revenues. The Net Income has also been lower though the

company has maintained to posts profits instead of losses.

The balance sheet numbers reveals that company has sufficient working capital and a good

current ratio. This shows their liquidity is good enough to secure them coverage of liabilities in

the event of revenue failure. The total liabilities are however on the higher side where the

company uses maximum debt in its profile to tread on the path of debt. This is good for equity

holders as they achieve more by trading on equity although the debt component posses a

significant amount of risks on the company. The Cash from operations has been significant and

able to cater for the financing and investing needs of the company. The higher investment shows

that the company is positive for the future outlook of the company as it expects conditions to be

better and economic structure to improve.

Ratio Analysis

Profitability 2012

ROA = 2.07%

ROE = 28.54%

Return on Capital = 3.17%

Gross Margin = 13.60%

Operating Margin = 8.27%

Turnover

Asset Turnover = 0.8

Receivables Turnover = 0

FA Turnover = 5.3

Inventory Turnover = 14.5

Liquidity

Current Ratio = 1.6

Quick Ratio = 1.5

Debt/Equity = 533.2

Debt/Assets = 0.89

The Ratio analysis of the company as above shows that the profitability ratios of the company for

ROE and Operating Margins are good enough to secure a hefty return for the company and

shareholders. The lower return on assets implies lesser utilization of assets. The return on capital

is also lower which implies the company should try and earn more to increase the same. The

Asset turnover being 0.8 implies lesser utilization of assets. The company should be able to

generate better revenues than the assets. There being no receivables, the ratio is zero. The Fixed

Asset Turnover is good for the company and shows optimum utilization of PP&E. The Inventory

Turnover is also posed significantly where the company generates sales from their inventory. On

the liquidity front, the current and quick ratio both is higher than 1 depicts better strength in

liquidity. The Debt Equity being higher due to higher debt in books and these posses a certain

amount of risks which the investors would demand from their investment.

Managerial Analysis

Ford is the largest family owned business in the world. In the year 1919, after a conflict between

the stockholders and Henry Ford, several investors left the company and it became wholly

owned by the Ford family members. All the CEO’s of the company have been directly related to

the founder of the company, Henry Ford since he retired from the position. The organization

structure of the Ford Company is complex in nature comprising of CEO, a chairman and a

number of vice-president. Ford motor is recognized as one of the world’s most ethical company.

It has been rated among the top 25 companies in the world in corporate social responsibility

stating as “Tomorrow’s value The Global Reporters.” Since September 2006, Alan Mullaley

holds the position of Ford’s president and CEO. The company owns a stake in Mazda and in

Aston Martin. It had owned 75% of Aston Martin for the last couple of decades and later

acquired 100% of the company. The board of directors is elected by and responsible to the

shareholders of the company. The board of directors has the obligation to scrutinize the

performance of the CEO. Their responsibility is to look after the activities of senior management

to guarantee the shareholders interests are being served. The company has formed trustees which

are responsible to set the policies relating to investment, management, governance and so on.

They also set the compensation and review the performance of all the officers. The company

reduced the global number of production suppliers from 3300 in 2004 to about 1260 by the year

end 2012. Through the efforts of the management, the company reduced the number of outlets in

US Ford and Lincoln from about 4400 to 3290 by the year end 2012. This led to the enlargement

of profits.

The company is committed to provide equal opportunity in all aspects of the business and to each

employee and to foster diversity in the workforce. It aims at providing an inclusive work

environment in which different ideas, perspectives and beliefs are respected. The company

ensures that each employee act with the highest sense of integrity and in a manner that protects

and enhances the reputation of the company. The effective management of the company

information helps to meet its goals, objectives, and mission and vision statement and maintains a

competitive advantage. The directors of the company are required to maintain the confidentiality

of company’s information entrusted to them. The senior management team of the company

continues to successfully advance the company’s One Ford global plan. The company had

further strengthened the leadership team by bringing required changes.

Conclusion

Ford is now the leader in innovation in the automobile industry right next to BMW. Ford is the

most financially sound American car manufacturer and possesses enough cash on hand to

continue the operations. The company has remained on the cutting edge of production vehicle

technology for more than a century ranging from cars and trucks to SUVs. With the enlargement

of hybrid engines, the market shares decreased to a great extend. However with the help of recent

strategies and innovations, it had proved to be extremely helpful in regaining the lost share

especially in United States. After the years of decline, the US market share has stabilized in the

recent years. The company continues to put emphasis on customers’ needs and satisfaction and

to face the challenges from their competitors. The domestic sales grew up by 21% to 9163 units

this year as against the 7577 in the last year. Ford undertook research and development activities

to reach its goal. In the R&D process, the company took the advantage of shared technology

which is a more sophisticated model. However, extreme capital is required for R&D and it is

difficult for the company to entry developing countries. The manufacturers must be capable of

producing mass automobiles so that it is affordable to all the individuals.

The company is planning to develop newer electric cars which will be powered by batteries, sun

and hydrogen fuel cells. It is planning to bring additional technologies in North America. The

sales have increased recently because of success of new Eco-sports car. The company has

acquired Livio, a developer of software in 2013. The company has further announced that they

are aiming to cut the amount of water used to make each vehicle by 30% globally by the year

2015, compared to the FY 2009. Ford has even pledged to add 12000 hourly jobs in US by 2015.

References

Annual Report, 2012 Retrieved from http://corporate.ford.com/our-company/investors/reports-

financial-information/annual-reports

Financial Information Retrieved from

http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=F

https://www.google.com/finance?fstype=ii&q=NYSE:F

http://finance.yahoo.com/q/hp?s=F&a=00&b=3&c=2010&d=11&e=2&f=2013&g=m

General Insights obtained from

http://www.strategicmanagementinsight.com/swot-analyses/ford-swot-analysis.html

http://www.forbes.com/companies/ford-motor/

http://www.marketwatch.com/story/pre-market-analysis-ford-motor-co-general-motors-co-tesla-

motors-inc-and-kandi-technologies-group-2013-09-17