Ford as a Fortune 500 Company
Making Its Way to the Top of the List
Ford as a Fortune 500 Company
Making Its Way to the Top of the List
Prepared by Bernadette Bartold,
Jessica Martin, Ashley Rocha, and
Ariel Skellett
November 18, 2013
Memo of Transmittal
Date: November 18, 2013
To: Professor Jenell Barnard
From: Group 2: Bernadette Bartold, Jessica Martin, Ashley Rocha, and Ariel Skellet.
Subject: Ford as a Fortune 500 Company
Per your request, Group 2 will be submitting a report on the Ford Motor Company and how it
has made its way to the top 10 of the Fortune 500 list of businesses.
Based on our findings, Ford stands near the top of the Fortune 500, ranked at number 9, due to
the company’s dedication to quality which includes various safety features that have aided their
boost in net income. Our goal is to share our research, which includes some of the early history
of Ford, as well as some recommendations on how Ford can improve its position, which still
rests below GM, and become the number one car manufacturer in the Fortune 500 group of
establishments.
Ford Motor Company, which was created in 1902, became one of the "Big Three" automotive
companies after 1928 when Chrylser (and before GM, in 1908) was founded. These three
companies provided many jobs for people in the United States, and were valued by car owners
until the late 1970's when new government regulations made each of the businesses rethink the
construction of their engines. Unfortunately, during this period, Ford itself became a joke for
consumers, and people began using the once well-respected name as an acronym for "Found on
Road Dead" and "Fix or Repair daily." However, because the quality was being questioned,
Ford's president and general manager began to conduct a new objective for the company, which
became "Quality is Number One." We believe that you will appreciate the following steps that
Ford took to maintain excellence in their vehicles.
Although Ford had to recall 10,000 vehicles in 1985 to 1986, it is constantly working on safety
features. In the recent years especially, they have includedMicrosoft SYNC system, MyKey,
Blind Spot information system, integrated blind spot mirrors, active park assist, rear inflatable
seat belts, and cross traffic alert as just a few of their security measures in their vehicles, and
they’re not even thinking of stopping.
It’s true, GM is still ahead of Ford in actual sales, but numbers from 2011 and 2012 show that
Ford is in the lead when it comes to net income. Our group believes that if Ford can match
quantity with quality, reinvent its Lincoln brand, move beyond past mistakes and damaging
acronyms, and stay on the track it is now by listening to its consumers and creating vehicles that
have the characteristics customers are attracted to, they will be well on their way to beating GM,
who is the only other car manufacturer ahead of Ford on the Fortune 500 list.
Contents
Page
Introduction……………………………………………………………………………………...1
In the Beginning………………………………………………………………………………....1
The Big Three…………………………………………………………………………....1
Honda Takes the Lead…………………………………………………………………...2
And Then There Was Quality…………………………………………………………………...2
Quality is Number One………………………………………………………………….2
Going Further……………………………………………………………………………………3
Safety Since the Beginning……………………………………………………………...3
Road Blocks……………………………………………………………………………..3
Technology that Enhanced Safety……………………………………………………....4
Pleasing the Buyers……………………………………………………………………..4
Surprising Turnaround………………………………………………………………….5
Eye-Catching Image…………………………………………………………………….5
Can Ford Grasp First?..................................................................................................................6
Coming Out on Top: Conclusions and Recommendations……………………………………..6
References……………………………………………………………………………………....8
List of Illustrations
Figures
Page
1. 1980 Vintage Ford Escort Ad………………………………………………………………..2
2. 2011 and 2012 revenue and incomes for Ford and GM……………………………………..6
Introduction
Ford Motor Companycurrently sits in the number 10 spot, after previously holding the
rank of 9, compared to all other Fortune 500 Companies. Of the top 9, only General Motors is
graded higher than Ford in automobile manufacturing (CNN Money, 2013). What is it that sets
Ford apart from the top automobile manufacturer?Taking into account Ford’s performance over
the years, including customer satisfaction ratings and the adjustments that have been made to
improve efficiency and customer satisfaction, Ford may be able to grasp a higher rank by
considering four areas of improvement. Focusing on a perfect balance between quality and
quantity of their present vehicles, reestablishing their luxury line, promoting the reliability of
their products, and concentrating on the production of vehicles that will satisfy consumers just
might give this growing company the boost it needs to power ahead of their rival.
In the Beginning
The Big Three
Henry Ford, a man who would end up having one of most well-known names in the
American automobile manufacturing industry, completed his first vehicle in 1896; a creation that
could ramble along at the then impressive speed of 20 miles per hour (Dammann, 1993). Six
years later, the Ford Motor Company came into existencefollowed by General Motors (GM) in
1908 and Chrysler nearly 20 years later (Middle East Company News, 2005; Shook, 1990).
These companies, known as “the Big Three” of automakers,would become, by the 1950’s, “the
dominating force within the American industry as a whole” and the security of the whole country
rested on their shoulders, for nearly a quarter of jobs in the United States (U.S.) relied on the
assembly or sales of the merchandise produced by these companies. Luckily, to the benefit of all,
the federal government sanctioned the construction of the interstate highway in 1956, which
allowed for greater travelling ease in a world where the majority of U.S. families owned at least
one car (Shook, 1990).
Due to the conviction that oil was a bottomless resource, energy was inexpensive and
since a projected five percent of Americans had acquired licenses by the 1970’s, motor vehicles
were essential to the average person’s way of life. At this time, the Big Three were producing
over-sized energy guzzling vehicles - like Ford’s Gran Torino and Country Squire - and no one
thought any different about it, until 1973 when Egypt attacked Israel. An oil boycott was
initiated and Americans realized that most of their oil came from overseas (Dammann, 1993;
Shook, 1990). This event led to a domino effect that led to unpredictable oil prices. Inconsistent
demands for small and then big cars put Chrysler in distress, placed Ford and GM “in the red,”
and finally a federal mandate changed the game for Ford completely (Shook, 1990).
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Honda Takes the Lead
With the Advent of the first Earth Day in 1970, the United States Environmental
Protection Agency (EPA) passed laws which instructed automakers to improve their fuel
proficiency by lessening their engines’ contaminants. Because U.S. “automakers were
concentrating on meeting government regulations,” Japanese automakers were able to get ahead
in the car-making game while everyone else struggled to keep up. Since Honda had a more pure
automobile, Americans began to buy more and more of the Japanese-made vehicles. By 1975,
10,000 Civics were being sold a month. It was around this time that people started looking
closely at the manufacturing of Ford cars, and by 1979, even the vice-president and general
manager of Ford Division, Philip Benton, had a difficult time picking out a Ford vehicle to drive
because he was not impressed with their stock. During this difficult time, people began using
Ford as an acronym for “Found on Road Dead” and “Fix or Repair Daily.” Finally, Philip
Caldwell realized that “our quality” in car manufacturing was “too low” and some much-needed
self-examination was at hand if consumers were ever again going to have faith in Ford vehicles
(Shook, 1990).
And Then There Was Quality
Quality is Number One
By 1980, Caldwell, who replaced Henry Ford II as CEO of Ford Motor Company,
created a goal for the company: “Quality is the number one objective of the Ford Motor
Company.” Luckily, this statement proved a reality for even the workers when Caldwell began
closing plants that didn’t meet quality standards. Caldwell even delayed the production dates of
the Ford Escort, - as can be observed in Figure1 - which at the time was considered a Job
One(“the first unit offthe assembly line”). Such an important job had never before been
postponed in the past (Shook, 1990). Now, Henry Ford’s “deep sense of public responsibility”
was coming in to play, overshadowing his demand for “efficient production,” if it was needed
(Sorenson & Williamson, 1956).
Figure 1
The Vintage Ford Escort ad shows the first Job One
vehicle to ever be delayed on the assembly line.
After two years of working on quality, the company
didn’t seem to be doing much better when after making a
total of $2.9 million in sales from 1981-1982 (a time known
as the “automobile depression”), Ford retained a yield of
$1.9 billion in 1983 while GM only made a profit of $ 653.1
million (GM Profit, 1983; Shook, 1990). The tide had finally
turned. Consumers had been looking for value in Ford cars
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and the problem had been that the company had been concentrating on “quantity, not quality.”
However, the mistake had been learned,and in 1983, a “formal quality ratings for every supplier”
was created which stated that a Quality Supplier would rank 85 or above (with 100 being the
highest number), with even that rate jumping to 90 or better in 1990. If a supplier didn’t meet
this standard, no matter how low their bid for selling their car parts, then business would not
even be considered to those companies. Additionally, Ford endeavored to employ minority
suppliers partly to “alleviate social guilt” and also because “It was the right thing to do because
minorities are a part of this nation” (Shook, 1990). By the 1980’s Ford was manufacturing
quality vehicles, treating minorities as equals in business, and by doing so, ultimately meeting
the desires of a wide range of consumers while competitors such as GM were recalling over
80,000 cars that exceeded federal emission standards (Wall Street Journal, 1986). GM, on the
other hand, which was falling behind its rivals – mainly Ford and Honda – slashed prices on
expenses, but in doing so sacrificed quality. “It gave accountants more control over development,
and this often produced unimaginative designs and chintzy plastic interiors that turned off
consumers” (Brown, 2011). So, with all of these facts taken into account,what it is that pushes
Ford into the number 2 spot in the Motor Vehicles and Parts Industry(CNNMoney, 2013)?
Going Further
Safety since the beginning
The brand promise of Ford Motor Company is to “Go Further”, and that is exactly what
the company has been doing. Advancements in technology have significantly increased safety
measures, which have given Ford Motor Company the boost it needed over the past years. With
vehicle safety being the company’s top priority, Ford Motor Company has remained one of the
top global leaders in vehicle safety.An increasing number of standard safety equipment items
were added to vehicles in 1966 to ensure well-being among their drivers. These security features
included “rear seat belts, padded instrument panels, padded sun visors, outside rear view mirrors,
back-up lights, windshield washer, and a four-way emergency warning flasher” (New York
Times, 1965).
Road Blocks
Over the years, Ford Motor Company has hit some roadblocks, as is natural for any
innovative motor business. While the company has had some set-backs, recalls have not stopped
Ford Motor Company from ensuring the safety of their consumers and vehicles. Despite the
recall of 80,000 1985-86 model E-350 Econoline and Club Wagon vehicles in 1986 for safety
reasons, Ford has not ceased fixing the problems and enhancing security on their vehicles (Wall
Street Journal, 1986). In 1996 Ford had the largest recall by a single car manufacturer, with 8.7
million vehicles. Ford Motor Company reacted quickly to this issue out of concern for their
consumers, which led to a low U.S. incident rate and a swift fix to ensure that their vehicles were
dependable for driving (Petrauskas, 1996). Not only did Ford continue to ensure safety in their
vehicles; the company took their standards to a new level. In 1999, Ford began a new radiolaunched safety campaign to promote the wellbeing of their drivers byencouraging them to use
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Ford’s tips while on the road (PR Newswire, 1999). The advertisements included directions for
buckling seatbelts, descriptions on how not to tailgate, as well as the dangers of aggressive
driving. With the advancements in technology, Ford is now able to enhance their vehicles with
features that pass and exceed vehicle safety standards, which ensures that consumers are secure
while driving in their Ford vehicle. Ford’s high standard for safety has led them to produce“more
U.S. government 5-star safety-rated vehicles than any other brand and more IIHS "Top Safety
Picks" than any other automaker” (Pharma Investments, 2009).
Technology that enhanced safety
With the latest and greatest technology, Ford has incorporated many features in their
vehicles to ensure overall safety for their consumers. In 1999, Ford announced, in a radio
advertisement, that their new features were set in place to ensure safety. These features included
the BeltMinder™ system and the Personal Safety System. The BeltMinder™ added visual and
audio reminders to the driver to remind him or her to wear their seatbelt. Another feature is the
“Personal Safety System, which uses sensors to analyze conditions at the time of an impact and
automatically deploys the most suitable safety devices for the given crash situation.The system
features dual stage air bags for the driver and front-seat occupant” (PR Newswire, 1999).
Moving into the 2000’s, Ford announced that the company was working on even more
technology to improve safety in their vehicles. This included tire pressure monitors, as well as
starters that will eliminate idling by enabling them to turn an engine on and off as needed. In
2008 and 2009 Ford launched more innovative technology to actively help customers detect and
avoid any possible dangers while driving. “The new technologies build on Ford's leading number
of top safety ratings, including the most 5-star government ratings of any automaker, and a
leading number of Insurance Institute for Highway Safety ‘Top Safety Picks’" (Technology &
Business Journal, 2008). Newer technology that is seen on today’s Ford vehicle include the
Microsoft SYNC system, MyKey, Blind Spot information system, integrated blind spot mirrors,
active park assist, rear inflatable seat belts, and cross traffic alert (U.S. Fed News, 2010). With
all the new technology it has to offer, it is no wonder that Ford Motor Company occupies a spot
in the top five in the Motor Vehicles and Parts Industry.
Pleasing the Buyers
Adding new safety features is not the only thing Ford Motor Company has done to
improve their vehicles. Customer feedback has led Ford to adjust their technology and design
with hopes of leaving their customers satisfied. From the beginning of the 2006 through the end
of the 2010 model years, Ford Motor Company was recognized for their achievement of
unparalleled success in quality as well as customer satisfaction improvement. “Ford finished the
2010 model year ranked near the top of the industry.” This “near the top” ranking is quite an
achievement for Ford who sits just below GM in the Fortune 500 rankings. A contributing factor
to Ford’s success in quality was the extensive decrease in “things-gone-wrong” (“US: RDA
group recognizes Ford,” 2011). Recently, Ford has encountered setbacks that have projected a
negative image on their launch of the MyFordTouch infotainment system as well as the new line
of direct injection turbocharged EcoBoost engines (Priddle, 2013). Ford proudly introduced their
new MyFordTouch infotainment system, the first of its kind, quickly receiving consumer
feedback finding the system to be “difficult to operate.” Critics also had a negative feeling about
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the new Touch system finding it to be “too distracting” and requiring a learning curve. Ford
responded to the complaints by sending owners a USB that they were able to plug in and update
their touch system with. The update was about 60 minutes long and was meant to be easy for the
owners to use (Detroit Free Press, 2012). Even in today’s high-tech world, it appears that the
touch system seemed too advanced.
Surprising Turn-around
Ford has taken the recent recalls as learning experiences and dealt with the issues
promptly in a seemingly efficient time frame. Ford’s two types of Turbocharged EcoBoost
engines had also fallen short. Compared with competitive models such as the Honda Accord,
Nissan Altima, and Toyota Camry, Ford’s EcoBoost was lacking in acceleration as well as fuel
economy. The EcoBoost is manufactured with two sizes, a 1.6-Liter and 2.0-Liter four-cylinder,
the 1.6 feels overworked while the 2.0 lacks smoothness (Consumer Reports Find, 2013).
Despite the recalls and setbacks, production rates have increased and Ford is hoping to manage
the change without any serious effects from the recent downsize of their suppliers (Priddle,
2013). Ford has added two more sizes, a 1.5-Liter 3-cylinder and a whopping 3.5-Liter V6, to
their line of EcoBoost engines. This has proven to be a beneficial move for the Ford Motor
Company with consumer demand rocketing. "Ford EcoBoost delivers great performance with
lower fuel bills, a recipe that is proving incredibly popular with consumers around the world,"
said Joe Bakaj, vice president, powertrain engineering for Ford. "EcoBoost engines are attracting
new customers to the Ford brand every day, and our plants are working hard to keep up with
demand.” The New Mexico State Police have purchased Ford vehicles with EcoBoost engines
and report a projected 10 to 15 percent improvement in fuel economy that will be sure to satisfy
taxpayers. Internal Ford data for North America shows that the most widely recognized fuelefficient engine is the EcoBoost engine proving its impressive turn-around (Ford Builds, 2013).
Eye-catching Image
One Ford model, equipped with a selection of EcoBoost engines, is the Ford Fusion.
The Fusion also received mixed reviews, specifically from Consumer Reports, stating that each
of the versions of the Fusion provide a ride that is comparable to those of much more expensive
vehicles. However, the dynamic abilities of the Fusion are not complemented by their EcoBoost
– as can be seen in Figure 2 - engine. Aside from the engine, the eye-catching body style and
sleek interior of the Fusion have also been found to be lacking. One of the changes made to the
Fusion is the exterior design. The new heightened door panels have cut down on outward
visibility. Other design flaws include trim that does not fit properly as well as the use of high
quality materials without installation of the like (Consumer Reports Finds, 2013). Is Ford making
the same mistake they did early on and focusing on quantity and production rates rather than the
quality of their vehicles? Besides the imperfections found in the Fusion, Ohio has chosen the
2014 Fusion to be the best mid-size sedan in the state. Ohio consumers find the strengths of the
new sedan to be the cutting edge convenience and safety technology. The attractive safety
features include SYNC voice command system, adaptive cruise control, and blind-spot detectors.
Fuel efficiency and other new features, such as inflatable rear seatbelts, a heated steering wheel,
and ventilated front seats, have also been shown to attract consumers (Best Midsize Sedan,
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2013). However, it takes more than protective attributes in Ford vehicles to get where Ford is
today.
Can Ford Grasp First?
It takes having the highest revenue on your year ending financial reports to make it to
the top of the Fortune 500 list. The revenues for Ford in the years 2011and 2012 were as follows
respectively in millions: $136,264 and $134,252 (Ford Motor Company) The revenues for GM
in the years 2012 and 2011 on the other hand, were $150, 276 and $152, 256 million (General
Motors Company). Looking at these numbers, it is safe to say that GM had greater revenue, and
from an outward perspective, can be seen as having done better than Ford in 2011 and 2012.Is
this really what should determine how well a company is doing? The equation for profit or net
income is as follows: profit equals revenues minus expenses. The net income for Ford as a total
company was $5,665 and $20,213 million in 2011 and 2012, in that order. (Ford Motor
Company) The net income for GM in 2011 and 2012, on the other hand, as a total company was
as follows respectively in millions: $4,859 and $7,585. (General Motors Company) From this
information it is safe to say that Ford had a greater net income or profit compared to GM in both
years, although GM’s revenues were actually higher.
Sources: Ford Motor
Company and General
Motors Company
Revenue and Net Income for 2011 and 2012
GM
2012
2011
Revenue
Ford
Figure 2: Revenue and
net income for Ford and
GM in 2011 and 2012 are
shown. In 2012, the net
income of Ford far
exceeded the income of
GM even though Ford’s
sales were much lower.
2012
Net Income
2011
0
50
100
150
Billion ($)
Coming Out on Top: Conclusion and Recommendations
So what will it take for Ford to come out on top of the Fortune 500 list? Comparing both
of their revenues against one another, Ford did great when compared to GM, considering they
have a higher number of major brands than Ford. Some suggestions for Ford Motor Company to
aid in their overall standing are as stated below.
1. Finding the perfect balance between quality and quantity is one major concern that
the company should strive on. Ford seems to rush their products to the market
before their ready, which has led to multiple recalls over the years. Balancing
quality and quantity could give Ford the extra boost they need to grasp the number
one spot.
2. Many people do not consider Ford’s luxury brand, Lincoln, to be an extravagant
vehicle. Ford should strive to sell more units in this category to increase revenue. To
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date, Ford Motor Company has Ford and Lincoln as their major brands while GM
consists of GMC, Cadillac, Buick, and Chevrolet. If Ford rebuilds their luxury line,
they may be able to redirect sales from GM’s luxury line, Cadillac.
3. Ford needs to move beyond the acronyms, “Found on Road Dead” and “Fix or Repair
Daily” and market their cars to be reliable and efficient.
4. After consumers realized that oil was coming from overseas, Ford began making smaller
vehicles, believing that this was what their customers really wanted. Once the hype had
calmed down, though, customers went right back to buying large vehicles, and Ford was
left with too much unsold inventory. If Ford can find a way to create reliable two-way
communication between their consumers to find out what they really want to get from
their relationship with Ford, than Ford can maximize its profits by building products that
they know customers will love.
Ford Motor Company has not lost their ability to “go further.” While the company is
closely trailing General Motors, some enhancements are needed to give Ford the extra
boost to reach the number one spot. We believe that if Ford follows the recommendations
that we have laid out, they will have a good chance of improving their rank in the Fortune
500 list of companies, and rise above GM as the number one business in vehicle
manufacturing. Grasping a larger market and understanding the wants and needs of their
consumers will give Ford the power they need to reach the top. Overall, Ford is trailing
behind, but has the ability to make its way to the top of the list.
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