Automotive Industry Financial Analysis

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  • Topic: Automotive industry, General Motors, Ford Motor Company
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Financial Analysis of General Motors and Ford Motor Company


Advanced Finance (FN)


Due date: June 01, 2009

Table of Contents

Executive Summary3
Porter Five Forces Analysis Model5
Competitive rivalry within the industry5
Barriers to Entry6
Threats of Substitutes and Complements6
Bargaining Power of Customers6
Bargaining Power of Suppliers7
SWOT Analysis7
GM SWOT Analysis7
Ford SWOT Analysis10
Ratio Analysis12
Appendix “A” Financial Ratio’s14
Appendix “B” Performance Ratings18
Table 119
Table 220
Works Cited21

Executive Summary
The two largest automakers in the world want to maintain their status as the top two. GM and Ford have been around for over one hundred years making automobiles for everyone to enjoy. During these recessionary times it will be very hard for these two companies to survive.

Financial and non-financial aspects of the companies through a porter model and a SWOT analysis will show that if they do not focus on the external and internal aspects of the economy, it will be very difficult to realize the opportunities that await them in the future.

Financial analysis ratios such as the profitability, Operations, Resources, Debt, Liquidity, and value ratio will be analysed for both GM and Ford. The ratios will be compared to reveal overall there must be a reduction in the debt and expense in order to change these companies into viable companies again.

Overall, as weak as they are, Ford is showing to be stronger than GM. The vast majority of the ratios indicate that both GM and Ford must increase sales and decrease costs to produce profitable companies again. This can be accomplished somewhat by listening to the consumer demand and producing more green products. Then they must react and produce what the consumers are asking for in a timelier manner.

Recommendations for the auto makers to maintain its current positioning in the market will include paying down long-term debt, maintaining relationships with consumers, and preparing for future growth. The two North American auto makers have the potential to become among the best auto makers worldwide as ranked by the J.D. Power Associates (J.D. Power and Associates).

What happened to the economy to cause such chaos in the auto makers industry? Was it the economy or was it the auto makers themselves that caused such turmoil for the industry? The Auto Makers are struggling to survive during this economic recession. The big “three” North American auto makers want to stay part of the big “three”. Early in 2009 the United States Government helped out two of the three with a stimulus package. Chrysler was the first to accept the U.S. Government help, unfortunately they were also the first auto maker to declare chapter 11 in the bankruptcy court. General Motors also accepted the stimulus package from the U.S. Government, and they are still in a very serious financial position. Ford did not accept any of the stimulus money, although they are struggling very hard to keep operations going.

Financial and non-financial aspects of GM and Ford will be analysed to determine if it is possible for them to survive and come out stronger after this recession. A comparison of the Ford Motor company that is currently stimulus free and General Motors will be prepared.

A Porter Model analysis will be conducted to look at the auto industry as a whole. A SWOT analysis of each of the auto makers will be presented to assess each organization individually.

Financial analysis ratios such as profitability, operations, activity, leverage, and market ratio will be analysed for Ford and General Motors. The data will be compared and recommendations...
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