Chapter 4 Case AssignmentWhat Would You Do? FORD MOTOR COMPANY Ford Motor Headquarters, Dearborn, Michigan. As you look out the window of the Glass House headquarters, you comment to yourself that it has not been a fun place to work these past few years. As you contemplate the future opportunities for the company, you are left with the thought that this company will look radically different in the next few years. An icon of North American manufacturing, Ford Motor Company has been one of the most prominent automobile producers in the world for almost 100 years. Founded by Henry Ford and 11 business associates in 1903, Ford Motor Company pioneered the moving assembly line, in which workers remained in place performing the same job on each automobile that came down the line. Henry Fords vision was the production of cars that were affordable to the masses. Today, Fords product lines include Ford, Lincoln, Mercury, Mazda, Aston Martin, Jaguar, Land Rover, and Volvo. Despite the proliferation of nameplates, Ford Motor has been losing money for years, particularly in its North American operations. Ford produces more vehicles than it can sell and does so under very difficult personnel conditions that are part of the industrys history. The United Auto Workers (UAW) represents most of the companys production employees, and the contract terms over the years have been designed to provide significant long-term support to those employees. Generous conditions for retirement, benefits, and job protection, developed when the industry was doing well, now weigh down the company operations. Another issue that has you concerned is the Premium Automotive Group (PAG), which makes the companys Aston Martin, Jaguar, Land Rover, and Volvo brands. Originally intended as the platform for the company to enter the luxury car market, this group has losses in the billions year after year. Although the company has substantial cash reservesover $20 billionoperating losses are steadily diminishing the companys financial safety net. Youve identified four options for the company: 1. The first is to close down older plants in an effort to realign production and sales. You dont want to produce more cars than you sell; in fact, it might be good to produce a bit less than you could actually sell. There is an enormous cost to buying out the workers, shuttering the plants, and dealing with the political implications of a closure. Furthermore, you are concerned that a resurgence of buying would leave you with so little capacity that consumers would move to competitors products. 2. A second option would be to move the company to produce only smaller cars, eliminating or sharply reducing the SUV and truck lines. This has the advantage of getting back to Henry Fords vision for the company as well as dealing quickly with products that are simply not selling in todays expensive-gas environment. 3. Third, you could take the dramatic step of dramatically reducing your North American presence and focus your efforts on international markets where Ford has been very successful. Europe, South America, and China have been very receptive to Ford vehicles and the company is doing well in these markets. 4. The fourth option is to sell the entire PAG group, letting someone else figure out how to make money selling so few vehicles a year. The hand-built PAG automobiles dont fit the Ford way of doing things anyway. Sources: A. Ohnsman, Ford market share targets suggest Toyota soon no. 2, Bloomberg, 15 September 2006, available at http://www.bloomberg.com/apps/news?pid=20601101&sid=aAEsMChx_agU; C. Tierney, Toyota sets big goal for Tundra, Detroit News, 15 September 2006, available at http://nl.newsbank.com; J. McCracken & J.D. Stoll, Ford unveils plan for sweeping cuts in 06 production, The Wall Street Journal, 18 August 2006, A1; A. Chozick, Toyota net rises 39% as auto maker deals with growth challenges, The Wall Street Journal, 5 August 2006, A3. Questions Short Answer 1. Discuss the importance and benefits of planning at Ford. 2. Based on the four options that have been presented as potential steps for Ford, describe Fords primary goal. 3. The alternatives that have been developed by Ford were developed using the rational decision-making model, but there are limits to the model that may impact the success of the plan. Describe these limits.