Keller Graduate School of Management
Health Rights and Responsibilities HS542
Professor Michelle Gomillion
I have chosen to research the topic of Both Ford and GM experienced serious issues during the pre, during and post TARP period causing them to restructure and change how they do business. Each of them reacted to these pressures differently. My paper will compare and contrast the way both companies reacted to this pressure.
According to the Wall Street Journal, UBS auto analyst Colin Langan did a comparison report on GM and Ford. His report compares Ford and GM across eight different categories: 1) financial leverage and ownership; 2) valuation; 3) U.S. market share; 4) product mix; 5) incentive trends; 6) [emerging market] exposure; 7) global EBIT margins; and 8) structural costs. Overall, our analysis directly supports our current ratings on each company, as Ford looks more favorable on most of these metrics vs. GM. In the areas he looked at the only one where Langan clearly gives GM the advantage is in market share in developing markets. “Clearly GM leads in most markets of the world. However, as we have already discussed, we believe the most important global market is North America—where GM’s market share gap with Ford has closed in recent years and is expected to continue narrowing.
I also read an article where they were highlighting the fact that GM is having hard time paying back their debt. Of the top bailout recipients, GM is the biggest laggard, the TARP watchdog says in his latest quarterly report to Congress. Bank of America, Citigroup, Chrysler and Chrysler Financial all have paid off their debt and left the TARP program. Even AIG has paid back more than 75% of what it owes taxpayers.
I find this topic very interesting because I have always assumed that GM had better cars and was simply a better company. My last three vehicles have been Fords and I truly would like to know more about the company I entrust to get me and my family from point A to point B.
“When managers are faced with a paradox, they are told to change their organizations or risk them perishing; at the same time, they are told that their organizations are at risk of perishing because of the disruptive impact of change.1 Up to 84 percent of U.S. firms are involved in a major organizational change, although many are deemed not successful” (Palmer 2009 p. 49).
I will be comparing how Ford and GM has changed the way consumers receive their stock, how their employees receive their benefits and how both companies designed or redesigned vehicles to improves their sales in the consumer market.
On November 18, 2010, General Motors opened for trading, and was currently trading above the offering price, around $35 per share. GM has been much talked about because it received an enormous amount of taxpayer aid - $50 billion worth. Ford (NYSE: F), on the other hand, didn't receive a single penny directly from the taxpayer, although it did benefit from Chrysler and GM being bailed out. Ford's stock rose from around $1 in December 2008 during the brink of the financial crisis, to around $16 today, as consumers thanked Ford for not taking any government money (Nachman 2010).
Despite the massive run up, I still believe Ford is a better buy at this moment in time, as the company is making cars that everyone wants to buy. Allan Mulally has proven over the time that he's been at Ford that he can run a car company, which is different than any other business. The company is slashing its debt load, and is profitable at a much earlier time, than even the most optimistic estimates from management. One thing that cannot be discounted is the consumer loyalty due to not taking any direct bailout money from the government. The U.S. taxpayer was disgusted by GM and Chrysler taking money, and has since turned Ford into the...