Ford Financial Analysis

Topics: Ford Motor Company, Balance sheet, Generally Accepted Accounting Principles Pages: 10 (3225 words) Published: October 31, 2012
Writing Assignment: Financial Analysis
Margaret Ison
Ron Lentz, CPA, PhD
Financial Management
September 8, 2012
Henry Ford incorporated Ford Motor Company in 1903 at Dearborn, Michigan, USA and is known to have adapted practices that were not popular in those days. The Car Maker is known for their famous “Model T” and the unique innovation of interchangeable parts in moving assembly lines that makes it possible to assemble cars at low cost and high reliability. Ford Motor established an impressive financial track record almost throughout the 20th Century (barring the record loss of $7 billion in 1992) till the Millennium started (Alan Mullally, 2012). Ford motor Company is the second largest automobile company in the world representing a $164 billion multinational empire. Ford is primarily known as a manufacturer of cars and trucks but also operates Ford Motor Credit Company which generates over 3 billion in revenues. Ford also owns The Hertz Corporation which is the largest car rental company in the world. Ford has vehicles under the name of Ford, Lincoln, Mercury, Jaguar, Volvo, Land Rover, Aston Martin, and has a controlling interest in Mazda Motor Corporation. Ford Motor Company incurred a financial loss of about 5.45 billion dollars in 2001 and never really recovered confidently after this slump. It is said that the Ford 2000 initiative of Lord Alex Trotman was the primary reason for financial downturn of Ford Motor Company. The failure of Lord Trotman’s Ford 2000 strategy was primarily due to the vision of centralized management that resulted in narrow viewpoints and too much of Americanization thus resulting in ignorance of the local factors of the Global Markets. As a result, Ford badly lost market share to the competition (especially the Japanese and European companies) that otherwise had a much wiser approach. Probably, Ford survived because of their unique innovations and quality that maintained the respect in consumer’s mind about the reliability, performance and quality of the products (Alan Mullally, 2012). While the company has been surviving for quite some time irrespective of the major financial hits that they suffered intermittently, their real testing times have emerged now when the entire world is reeling under a severe financial crisis. Ford maintains their esteem presence in the auto industry with continued innovation expansion and technological advances. With new expansion of its company, the Ford Motor Company needed a strategy for success and connecting these new manufacturing plants with suppliers and customers. Ford's strategy for increasing and maintaining their share of the automotive market is to establish strong interaction between them and consumers by addressing wants and needs at every stage of the purchasing process. For a company such as Ford, a corporation that supplies thousands of automobiles, the coordination and interaction in its supply and demand is essential to the businesses success. The company will have to remain competitive and innovative to survive. The automotive industry, along with many other industries, is in the midst of a global economic crisis that has caused a sudden and substantial decline in sales volume. This has put significant pressure on Ford’s liquidity. Ford has created a four pillar plan to help turn their company around. This plan includes aggressively operating profitably at the current demand and changing model mix, accelerating the development of new products, improving their balance sheet, and working together as a team to leverage global assets. Despite Ford’s well thought out plan for future success, they must remain mindful of the evolving risk that increase their vulnerability in this highly competitive industry. Ford frequently has expenditures and receipts documented in foreign currencies. Some of these items include sales of finished vehicles and production parts, debts and other payables, and investments in foreign operations. These...
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