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Ford Motor Company Business Analysis

Essay by   •  December 5, 2011  •  Case Study  •  1,461 Words (6 Pages)  •  2,311 Views

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Business Analysis II pg. 1

Ford Motor Company has taken a financial loss during the U.S. recession. But during the last years Ford has seen an increase in revenue. From December of 2009 to December of 2010 Ford Motor Company has grew from $103.9 billion to $119.3 billion. The bottom line growth for Ford Motor Company in 2009-2010 year was from 2.7 billion to 6.6 billion. Ford Motor Company was able to decrease the percentage of sales towards the cost of goods. Although operating income and interest expense increased in 2009-2010, Ford Motor Company has a stable income statement.

Ford Motor Company is considered risk-takers. Compared to other competitors, such as Chevrolet and Chrysler; Ford Motor Company are one of the most highly leveraged competitor. Ford Motor Company debt to Total Capital Ratio is shrinking to almost 100 percent. Ford has enough liquid assets to cover current obligations, which is considerable good. Unfortunately compared to top competitor's (Chevrolet and Chrysler), Ford Motor Company accounts receivable are among the lowest in the industry, with outstanding sales at a 0.46 day. Also, Ford Motor Company was one of the least efficient in the industry at managing inventories. According to my readings, it took 19.16 days of "its Cost of Goods Sold tied-up in Inventories". (Bloomberg. 2011)

"Ford said it hoped to eliminate as much as $10.4 billion in debt by giving cash and stock to debt holders as part of a revamping of its balance sheet. The moves, announced in March, 2009, were similar to what General Motors and Chrysler were required to do under their multibillion-dollar loans from the federal government. As a result, Ford reduced its overall borrowing by 40 percent". (N.Y. Times. 2008)

Business Analysis II Pg. 2

By reviewing the financial statements of Ford Motor Company, I have learned that the company is strong and focused with the will to succeed. Although sales and revenue have been tremendously better in previous years, before the U. S. recession, Ford Motor Company shows major potential and growth. Compared to its industry top competitors Ford Motor Company is among the best. I have also learned Ford Motor Company is a leader in innovation and technology, which has also boost sales.

The information that concerned me was the near-term assets and liabilities. I am extremely concern about managing inventory. The cost of goods sold should outweigh the inventory. Not to mention the Accounts Receivable must be dealt with better, Ford Motor Company is terrible at this. Managers could implement a buddy system as a marketing plan to eliminate the inventory concern, which will promote advance selling. The buddy system would allow employee's spouse or a family member to purchase a vehicle on a special discount. There are so many ways Ford managers can move forward with the financial information of Ford Motor Company. As far as the outstanding accounts in accounts receivable, managers could implement an incentive program to promote customers to pay their accounts in a timely manner.

Ford Motor Company financial health is substantial. Compared to Chrysler and General Motors (Chevrolet), Ford Motor Company is among the top competitors in domestic and imported vehicles. Ford Motor Company is leading the Unites States in domestic vehicles. In 2008 economic crisis, General Motors (Chevrolet) was bailed-out by the United States government. General Motors and Chrysler LLC are still in the

Business Analysis II pg.3

process of recovering from the debt they borrowed from the U. S. government. Chryslers LLC has been closing down plants in the Motor City (Detroit) they have experienced extremely downtimes during the recession. Both companies almost bankrupted in 2008 recession. Where as Ford Motor Company was able to with stand the fluctuation of the economy, with a bail-out in 2006. Ford Motor Company record has spoken for itself, by actions, numbers do not lie. General Motors and Chrysler have bounced back from the 2008 financial crisis, but Ford Motor Company sustained through the financial crisis.

The advantage of innovation and technology that Ford offers compared to General Motors and Chrysler LLC is minimal. Each company has a new innovation that competes very well with the other companies in the industry. "General Motors created a revolutionary advance in automotive propulsion technology since the invention of the automobile itself. It will use a common 110-volt household plug for charging its lithium-ion battery. For drivers traveling fewer than 40 miles a day, it will use zero gasoline and produce zero tailpipe emissions. For longer trips, its range-extending engine, using either gasoline of E85 ethanol, recharges the battery as the car travels and extends its driving range to around 360 miles before "plugging in" again". (General Motors. 2011) General Motors also invented the Onstar system that offers emergency assistance in case of an incident. Chrysler LLC has created the Uconnect that



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