Restructuring / Turnaround Strategies Case Study

Ford: Restructuring US Operations

Abstract:

The North American operations of Ford Motor Company (Ford), the leading automobile manufacturer in the world, exhibited a sharp decline in profitability in 2005 with a decrease in production and factory usage rate. The total number of Ford models sold in the US till November 2005, was 2.7 million only, compared to 4 million in 1995. Ford models were losing market share while competing with its Japanese counterparts, like Honda, Nissan and Toyota. Its profit margins were further depleted by the huge burden of legacy costs and pension obligations, due to its contract with the United Auto Workers Union.

The case highlights the restructuring initiatives undertaken by Ford, particularly the various cost-cutting measures, as a part of its revival plan to recuperate from its lost position in the automobile industry.

Pedagogical Objectives:

• To understand the dynamics of the US automobile industry
• To discuss the revival strategies of Ford to improve its profitability in the US
• To understand the impact of legacy costs in the business
• To discuss the transformation of a traditional company like Ford and the subsequent change in the product portfolio in accordance to the changing market demands in the US.

Keywords : Ford Motor Company; Restructuring; Legacy costs; Premier Automotive Group (PAG); Restructuring / Turnaround Strategies Case Study; Ford Motor Credit Company; Hertz Corporation; Junk bonds; United Auto Workers (UAW) Union; Other Post Employment Benefit (OPEB); Bill Ford; Hybrid technology; Voluntary Employee Benefit Association (VEBA); Cost cutting; Jim Padilla