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About the company

Ford Motor Company is an American automaker based out of Dearborn


Michigan, which is a suburb of Detroit. It was founded by Henry Ford on June
16, 1903. It is one of the largest family controlled company in the world for
over 110 years. It is the currently the worlds fifth largest automaker based
on worldwide automobile sales.

Our Prism of Analysis


Our analysis focuses on 2006 when Ford was in a state of complete chaos, it
can be easily called broken as its stock price had crashed (1.25$ per share in
2006), its debt was termed as junk, losses were piling up (Losses estimated
to be over 16 billion dollar) and new launches were failing, amidst these
crises the company brought in Allan Mullay as CEO, being an outsider and
someone with excellent credentials (Turned Boeing around after 9/11), he
was expected to bring on board new viewpoints on board about the problems
being faced by Ford. In our analysis we take a look at his actions.

Indicators of Decline
In 2006 there were clear indications that all was not well with the company,
they were having five straight years of declining sales, as already pointed
their stock prices were crashing, their losses were mounting, their new
product launches had failed due to over interference of Finance department
in product development, communication had broken down as senior
managers were hiding information and abstained from delivering bad news,
there was a sustained exodus of talent from the company at all levels and
they also had been losing market share constantly (from 30% in 1996 to 16%
in 2006).

Source of Decline
The main source of decline for the company is their own internal dynamics,
their communication had completely which is substantiated by the fact that
senior managers didnt inform employees of any bad news and held back
information, also their departments were not coordinating as evidenced by
finance department interfering with product development, such culmination
of factors lead to eventual decline, they were basically being crushed under
their own weight.

Company Actions
To bring themselves out of crises the company went for broke, they
announced restructuring, they also mortgaged all assets to raise $23.4 billion
cash in secured credit lines, in order to finance product development during
restructuring through 2009 and to bring a new viewpoint they brought in
outsider to company as well as to Automobile Industry Alan Mullay as the
CEO, who was responsible for pulling out Boeing from crises post 9/11.

Measures taken by the senior leadership


Instead of replacing the entire senior administration, Alan Mulally, the newly
appointed CEO focused on changing the dysfunctional system to shape a
culture of openness and collaboration. The lack of focus on the product
improvement was addressed by introducing a strategy called The Way
Forward which constituted the vision of One Ford. This plan prompted the
focus on the core brand and aligning all the activities and resources of the
organization for its betterment. The firm sold its European premium
automotive brands like Jaguar, Land Rover etc. and its stake in Mazda so it
could focus on core brands offerings. This visionary leadership style
enhanced the identification of the employees with the brand and its core
values to tap into a higher purpose.
Even in the crisis stage, the majority of the senior administrative staff was
not replaced. The CEO instead focused on improving the system to enhance
peer accountability. Initially, no manager was ready to disclose the realities
of his/her respective department. CEO implemented weekly Business
Process Review meetings that mandated all the senior managements to
attend the meeting and report the progress, review the operations and
identify the issues. Honesty and openness was encouraged by the CEO in the
meetings even if it painted a bleak picture. This measure enhanced
communication in both vertical and horizontal dimensions of the
organization. For a more hand-on approach CEO moved his office from top
floor to the floor where engineers were based which further minimized any
hindrances in open communication.
The management also implemented bold cutbacks that included suspension
of dividends to shareholders, closure of 17 of its plants and downsizing about
54,500 jobs. Even during these cutbacks the management protected
spending on product development to innovate and improve the quality of the
offerings. The need for sacrifices for the survival was also signaled by the
actions of the leadership. All the company corporate jets but one were sold
and other perks for top executives were minimized. The CEO set an example
of stellar work ethic by reporting to work at 5 am and working for more than
12 hours on a daily basis.
The loan of about $24 billion which was taken by the firm also enabled the
management to finance the development of a fresh product line and develop
better relationship with its dealers, which the CEO insisted on treating as the
partners. The financial resources also allowed the management to keep
Fords green strategy on track with the introduction of highly competitive line
of hybrid vehicles. In the proposed bailout of automobile industry in 2009,
the firm could deny any financial aid by the government which strengthened
the confidence of the investors. Instead of any aid, a line of credit up to $9
billion in bridge financing was requested. This measure allowed the firm to
safeguard against potential uncertainties by utilizing the supportive
elements in its environment. The firm was even able to support the
governments financial aid to the competitors which the leadership of the
firm at the time suggested to be essential for the good of the industry.
Stage 3: Faulty Action
There were three main problems with Ford which resembled the faulty action
stage of the organisational decline model
a) Unnecessary Expansion
This is with regards to the enormous amount of side businesses including
Jaguar Land Rover and Aston Martin which Ford had acquired over the years.
This was a problem as it detracted from Fords original business, automobiles
of its own brand.
b) Concentration of Power by the CEO
Jacques Nasser the CEO of Ford till the year 2001 had accumulated
enormous power at the top with as many as 16 executives reporting directly
to him. This created a centralised decision making system which made for an
inflexible organisation.
c) Lack of information sharing lead to bad decisions
There was no culture of sharing in the organisation with subordinate
information often unable to pass through the centralised hierarchy and reach
the top management. This lead to decisions which were less informed and
therein caused further downturn in the position of the organisation.
Stage 4: Crisis
There were 4 major indicators that hinted that Ford had reached the fourth
stage of the organisational decline model, Crisis.
a) Loss
Ford made a mega loss of USD 12.7 Billion in the year ended 2006. This was
the strongest indicator that the company had reached an emergency
situation which it had to lift itself up from to avoid dissolution.
b) Stock Prices
Stock, which had been as high as $17.34 in 2004, had fallen to $8.39 when
Alan Mulally joined as CEO, before plummeting to $1.01 IN 2008.
c) Divisiveness
Fords employee culture was turning increasingly divisive and internal
fighting had become the norm. This meant that no focused co-ordinated
action could be taken as the company was splintered into employees who
were unwilling to collectively take responsibility for the companys results
and work together to achieve a turnaround.
d) Credit Rating Decline
Moody's Investors Service lowered the ratings of Ford Motor Company to
ba3 from ba1 which made it that much more difficult and expensive for
the company to secure much needed funds.

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