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Ford: History and Corporate Profile
Ford Motor Company (F) is one of the world’s largest automotive manufacturers. The company has a long history as one of the most iconic American brands. The automaker traces its roots back more than 100 years to founder Henry Ford’s initial Detroit Automobile Company. Ford left this venture after a few years following disagreements with his financial backers, and established the Ford Motor Company. After a few early models, Ford struck gold with the Model T. Strong demand for the Model T created a need for increased production and led to the radical change/introduction of the assembly line. The company continued to gain traction, though there were some financial issues, through the early 1920’s and only began to face real competition when General Motors (GM) introduced its more attractive and powerful Chevrolet model. This eventually led to the discontinuation of the Model T, after 15 million units had been produced, and the introduction of a new Model A. But the industry had entered a new competitive stage and Ford had basically relinquished its pre-eminent position.
Ford had varying degrees of success through the 1930s and 1940s, as the company struggled through the Great Depression and its aftermath, but regained its footing in the years leading up to WWII. Although the company’s financial position and sales performance remained relatively solid, management became more of an issue. The combination of founder Henry Ford’s strong-willed managerial style with a lack of preparation for management succession, was exacerbated by the unexpected death of Ford’s son Edsel, who had been President since 1919. This was the start of a broader theme of corporate problems stemming from bad decision making and management instability. Indeed, much of the ensuing corporate turmoil revolved around conflicts between various members of management teams and Henry Ford II (the founder’s grandson). But, despite the corporate issues, Ford had some product success in the 1950s and 1960s, including the introduction of the iconic Thunderbird and Mustang vehicles.
The company entered the 1970s with a strong surge of growth from European operations. This coincided with an industry shift toward compact cars, and the company tried to build upon the success of its European Ford Escort model. The domestic efforts led to the introduction of the Ford Pinto. This model became embroiled in controversy, following allegations that structural design flaws allowed the fuel tank to be punctured in rear-end collisions. Ford’s reputation was significantly damaged as a result of several incidents involving exploding gas tanks, related litigation, and other negative publicity. At the same time, Japanese compact cars continued to gain popularity in the United States, and Ford’s market share dropped steadily. The combination of reduced volume and higher labor costs resulted in heavy losses in the early 1980s. Indeed, the company posted losses of approximately $1.5 billion and $1.0 billion in 1980 and 1981, respectively. This led to a significant restructuring of U.S. operations, with plant closures and workforce reductions.
Results improved dramatically in the second half of the decade, with record sales and earnings. Moreover, the recovery was bolstered by the introduction of the highly successful Ford Taurus in 1986. But once again, the company’s performance changed directions within a few years, as the recession in the early 1990’s had a major impact on results. Indeed, Ford posted record losses in 1991 and 1992. The company regained its footing very quickly, however, as the economy recovered, and began to increase its focus on the rapidly expanding truck, SUV, and minivan segment. This shift revitalized the company’s identity to a large degree, and has had a long-term impact on the overall business mix and performance.
Although the recent recession and unprecedented industry downturn weighed heavily on results, and brought Ford seemingly near the brink of collapse, the automaker emerged in a stronger position. Notably, Ford achieved substantial market share gains as the sole Detroit auto company to avoid losing its viability. Meanwhile, the company has improved its competitive position with a more-balanced product mix. This has included the introduction of new fuel efficient models like the Fiesta, Fusion, and Focus. Moreover, it has significantly reduced labor costs as a result of contract negotiations and agreements.
The car giant has increased its presence in emerging markets, but still has a long way to go to catch up to the competition. Indeed, even with its solid foothold in Europe, the automaker remains highly dependent on its domestic operations. Notably, North America contributed nearly 80% of the automotive segment’s operating profit in 2010, and the percentage is on pace to climb higher in 2011. However, Ford has improved its presence in South America, where it has a market share of approximately 10%. Meanwhile, it has increased its focus on the Asia/Pacific region, with a large emphasis on China. The company plans to introduce 15 new vehicles and open four new plants over the next few years to support this expansion. These investments and initiatives should yield a strong platform for long-term growth, while providing additional diversification from the domestic business.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned