Use point form to cover the following in one page! 1) Main management question (dilemma to be solved) 2) Analysis of the situation (qualitative/quantitative) 3) Alternatives (distinct options that answer the management question) 4) Decision Criteria (to be used to evaluate the alternatives and recommend one) 5) Alternative recommended and why 6) Action plan (to implement the alternative recommended)

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Ford Motor Company: Will the Company's Strategic Moves Restore its Competitiveness and Financial Performance? Marlene M. Reed Baylor University Rochelle R. Brunson Baylor University report by Road Show on CNET, dated June 5, 2019, suggested that the Ford Fusion 2020 model would be the last car Ford would pro duce. The discontinuation of the Fusion was said to be a part of Ford's shifting strategic focus away from automobiles as car sales had been its lifeblood since 1908 when Henry Ford revolutionized passenger trans- portation with production of the Model T. Industry analysts also wondered if the American love affair with the SUV and trucks would continue if the price passenger cars toward crossovers and SUVsmany with electrified powertrains.1 Observers wondered _ Copyright 2021 by Marlene M. Reed. Baylor University and Rochelle if Ford could essentially abandon the market for R. Brunson, Baylor University. All rights reserved. EXHIBIT 1 History of the Ford Motor Company 1896Henry Ford built the Ouadricycle, the forerunner of the automobile. 1899Henry Ford joins a group that founded the Detroit Automobile Company. 1901Henry Ford defeats the top racecar driver of the era in his 26. The victory led to Sweepstakes. The victory led to Ford's second short-lived attempt at auto manufacturethe Henry Ford Company. 1903The Ford Motor Company is incorporated with an initial 12 investors and 1,000 shares. The company had spent almost all of its $28,000 cash investment by the time it sold the rst Ford Model A on July 23. By October, the company had turned a prot of $37,000. 1904Ford Motor Company of Canada is founded. The plant was built in Windsor. Ontario. across the river from Ford's existing facilities. The company was created to sell vehicles notjust in Canada but also all across the British Empire. 1907Ford introduces the scripted typeface of its trademark. 1908Ford introduces the Model T. Ford sold 15 million of this model before ceasing production in May 1927. It became the most famous car in the world. 1913Ford introduces the integrative moving assembly line to auto production. This innovation reduced the Model T's chassis assembly line from 12.5 to 1.5 hours and brought about a revolution in manufacturing. 1914Ford institutes the famous \"$5 Day." This wage payment to Ford's employees was double the existing rate for factory workers. The company also reduced the workday from 9 to 8 hours. The day after this wage rate was announced, 10,000 people lined up hoping to be hired by Ford. C44 PART 2 Cases in Crafting and Executing Strategy 1917Ford produces its first truck. The truck was called the Ford Model TT based on the Model T car but with a reinforced chassis and rear axle. 1919Edsel Ford succeeds Henry Ford as president of the company. 1922Ford acquires the Lincoln Motor Company. 1925-Ford begins production of the Ford Tri-Motor airplanes. The \"Tin Goose" was the rst airplane used by America's early commercial airlines. 1927-Ford begins selling the 1928 Model A. The company closed plants all over the world to spend six months retooling factories and perfecting the design of the car. 1936Ford begins selling the Lincoln Zephr line. Lincoln Zephr's sleek, aerodynamic shapes helped make the brand a sales success, but when auto production ceased during World War ll, the Zephr name was dropped as well. 1941Ford begins producing Jeeps for the US. military. 1942Ford halts production of automobiles in the United States to produce military equipment. 1948Ford produces the F-Series line of trucks. The company ceased building trucks on car platforms and used a purposebuilt truck platform instead. 1954Ford introduces the Thunderbird. This car would become a classic. 1956Ford becomes a publicly-traded company. 1959Ford Credit is established. The company offered loans and leases to car buyers. 1964The Ford Mustang goes on sale. The car was a huge success and has remained one of the fastest-selling vehicles in history. 1965-Ford-Philco engineers unveil the Mission Control Center used to put a man on the moon. 1976-Ford of Europe introduces the Ford Fiesta. 1986Ford introduces the modular assembly line at its St. Louis assembly plant This made use of automated ancillary assembly lines to produce vehicle subassemblies. 1990Ford introduces the Explorer. With this model, Ford helped launch the SUV market. This became one of Ford's most successful models. 1996Ford introduces the Ford Ranger Electric Vehicle. This was a forerunner of today's electric vehicles and hybrid energy systems. 1998The Lincoln Navigator is introduced and spurs rapid growth in the luxury SUV segment. 201 1Ford discontinues the Mercury line to concentrate all of its efforts on the Ford and Lincoln brands. 2016Ford Mobility. LLC is created. This focused on changing the way the world moves. Ford Smart Mobility was designed to take the company to the next level in connectivity. mobility. autonomous vehicles, the customer experience and data analytics. of gasoline began to escalate as the United States, Russia, and the United Arab Emirates. engaged in tactics to alter energy prices around the world. Exhibit 1 below outlines key milestones in the history of the Ford Motor Company. iFord's Strategic Situation in 2020 By 2020, Ford employed over 200,000 people world wide in 70 plants producing midsize cars, SUVs, and pickup trucks. Since the recession of 2008. the company's revenues had rebounded due to increa disposable income levels. falling unemployment, and renewed demand for big-ticket purchases. However, the company reported falling sales in some of its established markets in 2019 and 2020partially due to the spread jot" the COVID~19 virus in early 2020. Exhibit 2 pres- Ients Ford's stock performance between April 2015 and April 2020. The company' s consolidated income state- ments for 2017 through 2019 are presented in Exhibit 3. Ford Motor Company's consolidated balance sheets for 2018 and 2019 are presented in Exhibit 4. CASE 4 Ford Motor Company C45 April 2020 EXHIBIT 2 Performance of Ford Motor CDmpany's Stock Price, April 2015 to (a) Trend in the Ford Motor Company's Common Stock Price 16 14 12 10 Stock Price (S) 2016 2017 +60% +45% +30% \"L 0'1 39 30% Ford Motor / Company's Stock Price l A U1 BE 60% 7 5% Percent Change (April 2015 = O) + o 32 f i S 2016 2017 Ford's New Product Strategy William Clay Ford, J11, Executive Chairman of Ford suggests that 115 years ago, when the company began; the company's mission was to make peeple's lives better by making mobility accessible and affordablel By 2020, the company was moving toward manufaci turing \"smart vehicles for a smart world.\" The world plan focused on four pillars: (1) A winning portfolio; (2) new propulsion options; (3) a high-level autonm mous business built on the most trusted self-driving 2018 Year 2019 2020 (h) Performance of the Ford Motor Company's Stock Price Versus the S&P 500 Index /' S&P 500 2018 'Year 2019 2020 systems; and (4) cloud-based mobility experiences that deliver recurring revenue. The winning portfolio in 2020 was envisioned to be the Escape. Expedition, Explorer, Ranger, F-lSO gI-berid, Bronco, and the Mustang Shelby GT500. The Ford Bronco was produced between 1966 and :1996 and was discontinued when the smaller two- .door Bronco II suffered from a tipping problem. The reintroduced Bronco will be modular with a remov- able top and doors. C46 PART 2 Cases in Crafting and Executing Strategy EXHIBIT 3 Consolidated Income Statements for the Ford Motor Company, 2017-2019 (15 in millions except per share amounts) Revenues Automotive $145,653 $148,294 $143,599 Ford Credit 11,113 12,018 12,260 Mobility 10 26 41 Total revenues 156,776 160,338 155,900 Costs and expenses Cost of sales 131,321 136,269 134,693 Selling, administrative, and other expenses 11,527 1 1,403 1 1,161 Ford Credit interest, operating, and other expenses 9,047 9,463 9,472 Total costs and expenses 151,895 157,135 155,326 Operating income 4,881 3,203 574 Interest expense on Automotive debt 1,133 1,171 963 Interest expense on Other debt 57 57 57 Other income/(loss), net 3,267 2.247 (226] Equity in net income of afliated companies 1.201 123 3 IncomeltLoss) before income taxes 8,159 4,345 (640] Provision forl(Benet from) income taxes 402 650 {724) Net Income 7,757 3,695 84 Less: Income attributable to noncontrolling interests 26 18 37 Net Income attributable to Ford Motor Company 5 7,731 $ 3,677 $ 47 Earnings per share attributable to Ford Motor Company common and class B stock Basic income $1.94 $0.93 $0.01 Diluted income $1.93 $0.92 $0.01 Weighted-average shares used in computation of earnings per share Basic shares 3,975 3,974 3,972 Diluted shares 3.996 3,998 4.004 Source: Ford Motor Company 2019 10-K, EXHIBIT 4 Ford Motor Company Consolidated Balance Sheets, 2018-2019 ($ amounts in millions) December 31, 2018 December 31 , 201 9 ASSETS Cash and cash equivalents $ 16,718 $ 17.504 Marketable securities 17,233 17,147 Ford Credit nance receivables, net 54,353 53,651 Trade and other receivables, less allowances of $94 and $63 1 1,195 9,237 Inventories 1 1,220 10,786 Assets held for sale 2,383 Other assets 3,930 3,339 Total current assets 1 14,649 1 14,047 CASE 4 Ford Motor Company December 31, 2018 Ford Credit nance receivables, net 55,544 Net investment in operating leases 29,119 Net property 36,178 Equity in net assets of affiliated companies 2,709 Deferred income taxes 10,412 Other assets 7,929 Total assets $ 256,540 LIABILITIES Payables $ 21,520 Other liabilities and deferred revenue 20.556 Automotive debt payable within one year 2.314 Ford Credit debt payable within one year 51,179 Other debt payable within one year Liabilities held for sale Total current liabilities 95,569 Other liabilities and deferred revenue 23.588 Automotive long-term debt 1 1.233 Ford Credit long-term debt 88,887 Other |ongterm debt 600 Deferred income taxes 59? Total liabilities 220.474 Redeemable noncontrolling interest 100 EQUITY Common Stock, par value $.01 per share (4,01 1 million shares issued of6 billion 40 authorized) Class B Stock, par vaiue $.01 per share (71 million shares issued of530 million 1 authorized) Capital in excess of par value of stock 22.006 Retained earnings 22.668 Accumulated other comprehensive income/(loss) (7.366) Treasury stock (1,417) Total equity attributable to Ford Motor Company 35,932 Equity attributable to noncontrolling interests 34 Total equity 35,966 Total liabilities and equity $ 256,540 ource: Ford Motor Company 2019 10K. C-47 December 31. 2019 53.703 29,230 36,469 2,519 1 1.863 10,706 $ 258,537 $ 20,673 22,987 1 ,445 52,371 130 526 98.1 32 25,324 13,233 87,658 470 490 225.307 40 22.165 20.320 (7,723) (1,613) 33,185 45 33,230 $ 258.537 C-4B PART 2 Cases in Crafting and Executing Strategy Two years before the Bronco was discontin- ued, the automobile gained a great deal of atten- tion when A] Cowlings drove OJ. Simpson down a Los Angeles freeway after Simpson was charged with the murders of his ex-wife and her friend. More than 95 million people across the United States watched the two-hour pursuit on television while crowds gathered on overpasses to cheer on the NFL football legend.2 Ford Credit Company Although the company experienced protability dif- ficulties in 2018 and 2019, its nancial arm, Ford Credit Company. 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 prots. This was up from 15 to 20 percent in the past. Ford Motor Company had, thus, been able to subsidize Ford's losses 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 $1.33 trillion that year. In addition, subprime loans reached $66 billion in the final quarter of 2019.3 There were several risks for the company in the 20205 regarding the Ford Credit Company. One risk was that this nancial arm of the company could experience higher-thanexpected credit losses, lower than-anticipated residual values on higher-than- expected return volumes for leased vehicles. Another risk was that Ford Credit could face increased com petition from nancial institutions or other third par- ties seeking to increase their share of nancing 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 influenced by such factors as slower economic growth, geopolitical events and other factors such as the COVE-1'9 virus threat in 2020. Some of the greatest challenges 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 prices, exchange rates, and interest rates. 5. 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. . Defects that result in delays in new model launches. 9. Operational systems could be affected by cyber incidents.' foreign Ford and the Coronavirus Pandemic. In early 2020, a new virus called the coronavirus or COVIDl9 began 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 31, stated that in 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.\" 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 stoppage of purchasing non-essential goods. Because of a shortage of ventilators to treat] coronavirus patients, Ford and General Electric's Health Care Division announced on March 30 than they together planned to produce 50,000 ventilators over the next 100 days. Ford planned to use a plant] in Rawsonville. Michigan, and about 500 workers to CASE 4 Ford Motor Company C49 EXHIBIT 5 Global Automobile Industry Products and Services Segmentation, 2018 Percentage of Market Cars 36.6% Cross utility vehicles (CUVs) 32.1% Pickup trucks 10.8% Sports utility vehicles (SUVs) 6.9% Other E Total 100% Source: Oelkan, Edi: (February 2020). Ibisworld.com, Global Car. ill Automoblle 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 pres-' sure and does not need electricity. Both Ford and GE announced that Ford would help increase produo 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 coma 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 EXHIBIT 6 2018 US. Retail Sales Volume Segregated by Product Type Trucks 1,139,079 45.6% $qu 872,215 34.9% Cars 486,024 w Total 100% Source: Annual Report of the Ford Motor Company. 2018 destinations for automobile products.7 The historic methodology for manufacturing automotive vehicles was to assemble cars at a domestic plant and then export them to their nal destinations. However, the jsupply chain has become more complex. The shift has been toward manufacturing cars close to their nal destination to save on logistics costs. Another part of this strategy is to focus on very specific 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 larger 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 he a remote possibility until the United States, Russia. and the United Arab Emirates decided in the spring bf 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