\fC418 PART2 Cases In Craftrng and Executing Strategy Two years before the Bronco was discontin- ued. the automobile gained a great deal of atten- ion when Al Cowlings drove OJ. Simpson down a Los Angeles freeway after Simpson was charged with the murders of his ex-wife and her friend. More han 95 million people across the United States watched the twohour pursuit on television while crowds gathered on overpasses to cheer on the NFL 'ootball legnd.2 Ford Credit Company Although the company experienced protability dif- Tculties in 20l3 and 2019. its nancial arm. Ford Credit Compary. posted its best results in 2019 of the past nine years. Their prots jumped to $3 billion before taxes. The result was that this arm of the com- pany accounted for 50 percent of Ford's profits. This was up from l5 to 20 percent in the past. Ford Motor Company had. thus. been able to subsidize Ford's osses and allowed the company to maintain a high dividend yield Unfortunately. data released by the New York Federal Reserve Bank in late 2019. indi- cated that the volume of 90+ days delinquent loans had risen sharply. The value of the overall auto loan and lease balances had surged to $I.33 trillion that year. In addition. subprime loans reached $66 billion in the nal quarter of 20m. 3 There were several risks for the company in the 2020s reprding the Ford Credit Company. One risk was that this nancial arm of the company could experience higher-than~expected credit losses. lower- thananticipated residual values on higher-than expected return volumes for leased vehicles. Another risk was that Ford Credit could face increased com- petition from financial institutions or other third par- ties seeking to increase their share of financing Ford vehicles. Finally. Ford Credit could be subject to new or increased credit regulations. consumer or data protection regulations or other types of regulations. Challenges for 2020 The automotive industry is affected by macro economic conditions over which the companies have little control. Vehicles are durable goods. and con- sumers exert strong choices about when and if they will buy a new car. This decision is inuenced by such factors as slower economic growth. geopolitical events and other factors such as the COV'TDI'} virus threat in 2020. Some of the greatest challengs to Ford in 2020 identied by management included the following 1. Acceptance of new and existing products by the market. 2. Sales of more protable larger vehicles. especially in the United States. 3. Increased price competition resulting from indus try excess capacity. 4. Fluctuations in commodity exchange rates. and interest rates. . Global macroeconomic factors such as protec tionist trade policies and other events including Brexit 6. The company's ability to maintain a competitive cost structure. 7. Pension and other post-retirement liabilities. 3. Defects that result in delays in new model launches 9. Operational systems could be affected by cyber incidents\" prices. foreign 01 Ford and the Coronavirus Pandemic. In early 2020. a new virus called the coronavirus or COV'IDJ'J beyn to cause serious illness and death around the world. Because of an increasing incidence of this disease in the United States. many states declared a \"shelter in place" order intended to prevent the spread of the virus by forcing people to work from home. Ford. on March 3]. stated that it was delaying the restart of a car plant in Mexico as well as four truck. SUV and van plants in the United States "to help protect its workers."5 This postpone ment came just two days after President Donald Trump extended the national social-distancing guide- lines through the end of April 2020. The shutting down of the economy resulted in the loss of more jobs than had occurred since the Great Depression and the stoppax of purchasing non-essential goods. Because of a shortage of ventilators to treat coronav'irus patients. Ford and General Electric's Health Care Division announced on March 30 that they togther planned to produce 50.000 ventilators over the next I00 days. Ford planned to use a plant in Rawsonville. Michigan. and about 500 workers to EXHIBIT 5 Global Automobile Industry Products and Services Segmentation. 2013 Product Percentage of Market Cars 36.596 Cross utllltyr vehlcles {CLIVE} 32.196 Plckup trucks 10.896 Sports utllltyr vehicles {SUVsI 6.9% Other @ Total 1 00% Source: Oelksn. Edi: (FebruaryI 2029}. Iblswerl dc om. Global Car & Mobile Mfg. make 30.000 ventilators a month. GE had licensed the design of the Ventilator from Airon Corporation of Melbourne. Florida. The device works on air pies- sure and does not need electricity. Both Ford and GE announced that Ford would help increase produc tion of another ventilator based on a design from GE Healthcare.6 Global Automobile Status A survey of the range of products and services pro vided by the global automobile manufacturing indus- try is shown below in Exhibit 5. Although the production of cars accounts for 36.6 percent of global industry revenue. this was lower than its production volume because cars normally sell at a lower price than SUVS and com- mercial vehicles. Therefore. they contribute less to revenue on a per-unit basis. The car segment had been growing as consumers opted for more fuel efciency. Ford sales in the United States. however. showed a lower total sales of cars than trucks or SUVssee Exhibit 6. Generally. Germany. Japan. the United States. and Canada are expected to be the world's largest exporters of cars and automobiles (SUVs. trucks. etc.). On the other hand. Germany. China. the United Kingdom. and Belgium are expected to be the largest CASEA Ford Motor Company [1-49 EXHIBIT 6 2018 U.S. Retail Sales Volume Segregated by Product Type Trucks 1,139.0?9 45.5% 5w; $2,215 34.9% Cars 436,024 E Total 100% Sourcetnnnuel Report ohe Ford Motor Company. 2013 destinations for automobile products? The historic methodology for manufacturing automotiie vehicles was to assemble cars at a domestic plant and then export them to their nal destinations. However. the supply chain has become more complex. The shift has been toward manufacturing cars close to their final destination to save on logistics costs. Another part of this strategy is to focus on very specic brand- ing devices to appeal to the customer. An example of this is the logo \"Made in America.\" A Future Strategy By 2020. the Ford Motor Company Board had some difcult decisions to make. Although the developing economies of the world primarily demanded smaller automobiles. the developed economies preferred the largr crossovers. SUVs. and trucks. The com- pany had already made a decision to discontinue the Ford Fusion. its largest automobile. and the public wondered if they would drop selling all of their cars except for the Mustang in the United States Another question that arose was: What would happen to large vehicle sales if the price of petroleum rose to alarming rates again? That had seemed to be a remote possibility until the United States. Russia. and the United Arab Emirates decided in the spring of 2020 to limit the daily production of petroleum. There was also the question of what would happen if people began nancing their vehicles at some place other than Ford Credit. and what could they do about that? The Board had much to think about as they put their strategic plan together