While Ford's domestic sales have been generally stagnant, Ford's European operations have increased share by producing many critically acclaimed vehicles well known for quality. This difference between Ford's domestic and international operations is a result of costly US manufacturing facilities caused by high wages and expensive healthcare and retirement obligations for union labor. Therefore, improving operational efficiency and developing a more fuel efficient product offering are the centerpieces of Ford's turnaround plan. For example, Ford has cut 40,000 jobs in the past three years and closed seven factories in the past five years.  Meanwhile the company has unveiled plans to bring six of its fuel efficient models (average fuel economy of over 30 mpg) currently sold in Europe to the U.S. market. In addition to answering demand for smaller cars in the short-term, Ford hopes that offering the same lineup of automobiles in all of its international markets will provide considerable economies of scale in the long-term.
Ford makes money through automobile sales and financing worldwide. Although Ford is a large global enterprise, the company has until recently made little effort to capitalize on potential economies of scale achievable with its size, meaning that Ford produced completely distinct cars for Europe, the United States, and the developing world. As the developing world has grown wealthier and higher energy prices have universally increased demand for better fuel economy, its current strategy seeks to produce fewer automobile models that can be sold across the globe with few modifications: coined 'world cars.' Ford's first world car is the new Ford Fiesta, which was engineered by Ford of Europe, but will eventually be produced and sold in the US and China. Ford's future plans call for the development of many more world cars, with the idea of creating a similar vehicle offering in all of its markets worldwide.
|Region||FY2010 worldwide wholesale unit volumes by automotive segment (in thousands)|
|Ford Asia Pacific and Africa||88|
Ford also makes money by offering consumer loans and leases to car buyers, as well as business loans and lines of credit, through its financial services division Ford Motor Credit Company. This division arranges automobile financing in 36 countries worldwide through a network of over 12,500 Auto Dealerships. Ford Credit is currently in the process of shrinking its portfolio and loan volume due to the drop in auto sales and the sale of Jaguar and Land Rover.
Traditionally, Ford's most profitable vehicles have been large SUVs and pickup trucks. However, volatile oil prices and political pressures for more fuel-efficient cars have taken a toll on the market for these larger vehicles. As a quick fix, Ford announced plans to retool three manufacturing facilities formerly used to produce trucks to instead make six of its more fuel efficient european models in the US (such as the Mondeo and European version of the Focus, both of which are far more efficient than Ford's current American offerings). This offers the advantage of quickly bringing highly demanded fuel efficient cars to the U.S. market without having to invest the money and time to create an entirely new automobile. In the longer-term, the company intends for all of its vehicles to be the leader (or co-leader) for fuel economy in any given car category. The company is also embracing lower tech solutions such as low resistance tires and 6-speed automatic transmissions that improve fuel efficiency over transmissions with fewer gears. These 6-speed transmissions allow the engine to rev at more efficient levels and improve fuel efficiency by 4-6% over the 4 and 5 speed transmissions currently installed on most Ford vehicles. Ford hopes to build 98% of its vehicles with six-speed transmissions by 2012.
Yet as the development and production of a new car costs billions of dollars and several years to implement, Ford's efficiency campaign is both costly in itself and difficult to reverse once implemented, especially since Ford has practically exhausted its ability to borrow or sell additional assets to raise money. These investments are planned to create approximately 1,000 new jobs related to Ford's future electric vehicles, which includes battery pack assembly. Therefore, if Ford's aggressive bet on a shift to smaller cars proves wrong, or is executed poorly, the long-term viability of the company could be in question.
Ford has historically maintained a heavy North American focus, claiming that higher income U.S. consumers buy more often and tend to buy upscale. However, North America's once-significant lead on international unit sales has all but disappeared and more importantly, growth in car sales in the BRIC countries continues growing quickly.
How Ford manages to take advantage of this trend will be decisive to the company's long term growth. As discussed above, Ford's current international plan is the "One Ford" campaign, which seeks to save production and design costs by producing a single fleet of vehicles for all markets worldwide. The first fruit of this scheme is the new Ford Fiesta, which was developed by Ford Europe but is sold in all Ford's major markets.
Ford's main advantage was that it was able to take advantage of the lenient political and economic climate meant for bankrupt US automakers while the company was operating under neither condition (bankrupt and government influence). As a result, Ford was able to "slash capacity, renegotiate healthcare, divest non-core brands, cut debt, and preserve valuable tax assets", all items that were easier to do with the US government and United Auto Workers more accepting to preserving the company rather than dealing with another bankrupt automaker.
Coming out of the TARP era, Ford now has transformed itself into a concentrated and highly levered bet on the recovery of US light vehicles. Ford has realized that the future of US automobiles will not be the gas-guzzling vehicles that were produced by automakers like Hummer for GM. Rather, Ford has positioned itself to take on upcoming government challenges of increasing MPG and market desire for smaller vehicles. However, other international brands, especially Honda Motor Company (HMC) and Toyota Motor (TM) have had a head start, as they did not suffer the many structural problems that the Big Three Auto Woes dealt with in the past years. Further, smaller cars may not only reduce emissions but also reduce profits; both Western Europe and Japan, two markets that desire compact and eco-friendly vehicles, are consistently one of the least profitable geographic segments for automakers. Though Ford has weathered the storm, it will continue to face greater challenges coming from the changing US market and stronger foreign competitors.
Ford continues to lose market share in the U.S., but considers this loss acceptable as it attempts to return the company to profitability, trying to become a smaller, more flexible auto company than it has traditionally been.