Thursday, March 5, 2020

ford v GM notes

FORD
Segments. We report our results in three operating segments that represent the primary businesses reported in our consolidated financial statements: Automotive, Mobility, and Ford Credit. Automotive Segment. Our Automotive segment primarily includes the sale of Ford and Lincoln vehicles, service parts, and accessories worldwide, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories. This segment includes revenues and costs related to our electrification vehicle programs. The segment includes the following regional business units: North America, South America, Europe, Middle East & Africa, and Asia Pacific (including China). Mobility Segment. Our Mobility segment includes Ford Smart Mobility LLC (“FSM”) and our autonomous vehicles business. Ford Credit Segment. The Ford Credit segment is comprised of the Ford Credit business on a consolidated basis, which is primarily vehicle-related financing and leasing activities. 
Our industry has a very competitive pricing environment, driven in part by industry excess capacity. Prior to its recent stabilization, the decline in the value of the yen over the last several years also has contributed significantly to competitive pressures in many of our markets. For the past several decades, manufacturers typically have given price discounts and other marketing incentives to maintain market share and production levels. 
For full year 2018, revenue grew 2% to $160.3 billion.
Net income attributable to Ford for full year 2018 was $3.7 billion or $0.92 diluted earnings per share of Common and Class B stock, a decrease of $4.1 billion or $1.01 per share compared with 2017. Company adjusted EBIT for full year 2018 was $7 billion or $1.30 diluted adjusted earnings per share, down $2.6 billion or $0.48 per share compared
with 2017. Net income margin was 2.3% and Company adjusted EBIT margin was 4.4% for full year 2018, down 2.6 percentage points and 1.7 percentage points, respectively, from 2017
Operating margin
Operating Margin: 2015:9.59% 2016:3.81% 2017:3.11% 2018:2.00% 9/30/2019:1.05%
Return on Equity: 2015:27.44% 2016:15.11% 2017:23.47% 2018:10.11% 9/30/2019:4.46%
Debt to Equity:2015:3.14 2016:3.2 2017:2.88 2018:2.8 9/30/2019:2.81
ROA: 2015:3.38% 2016:1.93% 2017:3.09% 2018:1.41% 9/30/2019:0.62%
Gross Profit: 2015: 75.71% 2016:6.02% 2017:2.53% 2018:-4.48% 9/30/2019:-22.79%
SWOT Links: 
SWOT Analysis (2019)
  • Strengths: 
    • Strong brand image
    • Global supply chain
    • Effective innovation processes
      • As one of the top players in the global automotive industry, Ford has a strong brand image that contributes to product attractiveness and customer loyalty. Also, Ford has a global supply chain that supports its operations around the world. Another strength is the company’s innovation processes that are now more effective following the launch of the One Ford plan in 2008. In this part of the SWOT analysis of Ford, evolving strengths support the company’s growth.
    • Global Recognition – Ford is a well-known brand in the automobile industry and is also recognized in the global markets because of its success in marketing and advertising. Its brand value is $12.74 billion according to the 2018 report of Statista.
    • Research and Development – Ford’s research and development is one of its key strengths because the company is committed to make and develop new products. They are continuously trying to improve the performance of their vehicles. The factors that are evaluated include fuel, efficiency, safety, and customer satisfaction.
    • Diverse Offerings – Ford caters to all kinds of demographic groups with their diversified brands and car models. They take care of the needs and wants of their consumers by providing them with more variety of cars and commercial vehicles.
    • Adaptability – Ford has a wide product and services portfolio which gives them strong leverage and less dependency on just one product range. Their commitment to adopting new technologies also gives them a boost in the competitive automobile market. They are also working on light weighting, cabin technology, and powertrain to enhance their product quality.
    • Huge Network – The company is also diverse in its operations and distribution, as they have a manufacturing presence in 62 countries across the world. Ford develops its cars on standardized procedures. They also invest heavily in various fuel sources.
  • Weaknesses: 
    • Limited global scope of production network
    • Higher costs compared to competitors
    • Slow innovation processes
One of Ford Motor Company’s weaknesses is the limitation of its network of production facilities, especially when compared to Toyota’s expansive global network. Ford also closed down some of its production facilities in Europe in recent years, further worsening this weakness. In addition, compared to competitors like Toyota, Ford’s costs and prices are relatively higher, and its innovation processes are relatively slower to respond to new or emerging trends even though the company has increased its innovation effectiveness. Thus, this part of Ford’s SWOT analysis indicates that the company is relatively weak compared to other top players, especially Toyota.
    • Product Recalls – Ford faced a huge loss and their brand image suffered due to the product recalls back in May 2016. They recalled approximately 830,000 Ford and Lincoln vehicles to replace faulty side door latches. It also recalled vehicles in May 2015 because of the safety failures of Takata airbags.
    • Weak Foothold – As Ford’s operations are diversified in many geographical areas, they lack focus in performance and productivity. They do not have a stronghold in emerging markets like India.
    • Poor Reputation – Ford has a poor reputation compared to its European and Japanese rivals. Lincoln, in particular, is considered an inferior brand as compared to English and German luxury car brands.
    • Dependence on U.S Markets – Ford is highly dependent on the U.S and European market. It limits its profits and revenues. Experts predict that the majority of future car sales will come from emerging markets such as China and India.

  • Opportunities: 
    • Global expansion through market penetration
    • Growth through product development
    • Cost reduction through strategic supply chain management
  • Ford Motor Company has the opportunity to grow and expand through market penetration (e.g. more dealerships and improved marketing) and product development (e.g. innovation to introduce new products to satisfy environmental concerns). Ford also has the opportunity to improve its financial standing by expanding its supply chain to achieve better economies of scale and reduce production costs. In this part of the SWOT analysis, Ford has opportunities for growth through operational expansion and innovation.
    • Eco- Friendly Vehicles – As Ford is already trying to be technologically adaptive, they have a fantastic opportunity to produce fuel-efficient cars and commercial vehicles. For example, they can build vehicles that run on different forms of energy. In this way, they have more options in designing eco-friendly vehicles. The 2018’s C-Max and Fusion Hybrid car model can be their most significant opportunity, as they have already captured the market with this new model.
    • Increase Customer Base – Ford is already working on penetrating the automobile market in India and China, they have an excellent opportunity to tap into other small countries in the world and grow their customer base.
    • Digital Marketing – Digital marketing is prevailing all over the world these days, so Ford has an opportunity to work on their digital marketing skills to grow its customer and supplier engagements.
    • Self-driving car – In 2017, Ford has invested $1 Billion in Artificial intelligence company, Argo AI, to develop its self-driving technology. In addition, Ford has partnered with Walmart and Postmates to test the future of grocery delivery.  

  • Threats:
    • Aggressive competitive rivalry
    • New entry of high-tech firms
    • Fluctuating oil prices
Ford experiences the threat of competitors like General Motors and Toyota, which engage in aggressive marketing and innovation. There is also the threat of technology firms like Google and Apple in their efforts to make driverless cars that could compete against Ford’s products. Moreover, oil price instability threatens the sales performance of Ford products, the majority of which have internal combustion engines. Thus, this part of the SWOT analysis shows that Ford must innovate to maintain competitive advantage.
    • High Competition – Ford is already facing cut-throat competition from its rival companies like Toyota, Tesla, and Tata. Ford keeps struggling to maintain its innovative position in the industry.
    • Increased Prices of Raw Materials – The rising raw material prices of steel and steel coil can directly affect the company’s cost and profit margin.
    • Regulations and compliance – The compliance and regulatory threats for automobile brands have increased in the past years because of environmental improvements going around the world. Vehicles are now inspected for public safety and quality issues. Ford can face serious challenges if it fails to comply with the new regulations.


GM
GM reports:
  • ROE is high because of excessive debt 
  • Revenue grew 0.9% from 2018 to 2019.
  • The Net Income for General Motors attributable for the full year of 2018 was $8,005 (in millions) or $5.58 diluted earnings per share; which is up significantly from 2017. In 2017, General Motors suffered a net loss of $3,882(in millions). The diluted earnings in 2018 were also up significantly from 2017 when their diluted earnings per common share was only $0.22. GM’s EBIT for the full year of 2018 was $8,549 (in millions). 
Operating Margin: 2015:4.08% 2016:5.82% 2017:5.95% 2018: 3.02%  9/30/2019:4.74%
Return on Equity:
Operating Expense Margin:
Debt to Equity:
Debt to Assets:
Net Profit Margin:


SWOT Links:
GM SWOT Analysis (2019)
  • Strengths: 
    • Joint ventures with local Chinese automotive companies
    • Strong position in the U.S. automotive market
    • Sustainability and environmental policies
Safe and eco-friendly vehicles
    • Strong brand portfolio
    • OnStar all-in-one assistant
    • Rare product recalls
    • Economies of scale
    • Strong brands
    • Economies of scale
    • Strong brand 
    • Human resource expertise
      • Economies of scale contribute to the effective implementation of General Motors’ generic strategy and intensive growth strategies. This strength also empowers the company to maintain a competitive advantage based on the extent of market reach and production capacity to address market demand. On the other hand, strong brands are a strength that supports General Motors’ competitiveness in terms of customer loyalty and the attractiveness of its automobiles. For example, customers are more likely to have a positive response to GM products compared to relatively unknown new brands. General Motors also has human resource expertise based on the company’s long history of automobile development and man000000000000000ufacture. This strength facilitates










        }”010 the development of new products that can directly compete against automobiles from other large firms, such as Tesla (Read: SWOT Analysis of Tesla Motors, Inc.). In this aspect of the SWOT analysis of General Motors, business strengths sustain the company’s capabilities as a major competitor in the automotive industry.

  • Weaknesses: 
    • Bureaucracy in organizational culture and structure
    • Limited market presence in developing countries
    • Limited business diversification
Bureaucracy is a major weakness that General Motors’ organizational culture currently aims to address. Such bureaucracy is responsible for limitations in the company’s flexibility in responding to issues in the external environment. Although this bureaucracy is also based on General Motors’ organizational structure, top managers consider culture as a primary means of addressing the matter. On the other hand, limited presence in developing countries is a weakness that affects the company’s potential growth in these markets. For example, General Motors offers only Chevrolet automobiles in India. Also, there are no Cadillac automobiles in Argentina and Brazil. Moreover, General Motors suffers from limited business diversification. The company has only two main businesses – its automotive business and GM Financial, a financial services business. Limited diversification exposes the company to greater market-based risks. This aspect of the SWOT analysis shows that General Motors’ potential global growth is hindered by its weaknesses.
    • Dependence on U.S. to generate most of the revenue
    • Brand awareness
    • Reliance on pickup trucks and SUVs for sales growth

  • Opportunities: 
    • Reduction of bureaucracy in the organizational structure and culture
    • Expansion of market presence in developing countries
    • Integration of advanced computing technologies in products
General Motors has the opportunity to reduce bureaucracy in its organization. Considering that bureaucracy is one of the company’s weaknesses, exploiting this opportunity can help in enhancing GM’s organizational competencies. Another opportunity is to increase General Motors’ market presence in developing countries. For example, the co0mpany can offer products other than Chevrolet automobiles in developing countries, as a way of increasing revenues. Integration of advanced computing technologies in automobiles is an opportunity that can improve General Motors’ competitive advantage. Automobile manufacturers’ efforts for rapid innovation make this opportunity significant. Based on this aspect of the SWOT Analysis of General Motors Company, there are significant opportunities for major growth in the international market.
    • Low fuel prices are increasing the demand for pickup trucks and SUVs
    • Timing and frequency of the new model releases
    • Demand for autonomous vehicles

  • Threats: 
    • High level of competition
    • Disruptive potential of new technologies
    • Governmental promotion of public transport and other alternatives
The automotive industry has a high level of competitive rivalry (Read: Porter’s Five Forces Analysis of General Motors Company). This situation threatens the company’s business performance. For example, competitors impose pressure on General Motors and its market share. Another threat against GM is the disruptive potential of new and emerging technologies. Apple, Google and other firms are developing technologies that can disrupt the industry. General Motors also faces governmental promotion of public transport and other alternatives. This factor counteracts the growth of automotive companies. The threats in this aspect of the SWOT analysis point to the importance of developing competitive advantage to protect General Motors’ business and its long-term development.
    • Increased competition
    • The rising U.S. dollar exchange rate
    • Increasing government regulations may raise the costs
    • U.S. automotive market is poised to slow down or even decline
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)