Ford Motor Company was incorporated in Delaware in 1919. They acquired the business of a Michigan company, also known as Ford Motor Company, which had been incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. They are one of the world’s largest producers of cars and trucks. They and their subsidiaries also engage in other businesses, including financing vehicles.
They have two operating sectors: automotive and financial services. Within these sectors, their business is divided into reportable segments based upon the organizational structure that they use to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. Automotive segment is divided into “Ford North America”, “Ford South America”, “Ford Europe”, “Ford Asia Pacific Africa”, “Volvo”. Financial services consist of two reportable segments, “Ford Motor Credit Company” and “Other Financial Services”.
1b. Describe the factors affecting Ford’s profitability and factors affecting the automotive industry in general. (P4)
The profitability of their business is affected by many factors, including:
* Wholesale unit volumes;
* Margin of profit on each vehicle sold; which in turn is affected by many factors, including;
* Mix of vehicles and options sold;
* Costs of components and raw materials necessary for production of vehicles;
* Level of “incentives” and other marketing costs;
* Costs for customer warranty claims and additional service actions; and
* Costs for safety, emissions and fuel economy technology and equipment; and
* As with other manufacturers, a high proportion of relatively fixed structural costs, including labor costs, which mean that small changes in wholesale unit volumes can significantly affect overall profitability.... [continues]
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