Management Ford Motor Company Essay

Executive Summary
Ford Motor Company is one of the greatest names in the global automobile industry. The company is the pioneer in the manufacturing industry that boosts the trend of mass-production in the automobile industry.

In this paper, we will discuss the issue surrounding Ford’s actions on alleviating barriers. In addition, we will also find out how they would affect stakeholders of the company. The study is mainly directed to discuss Ford’s corporate responsibility toward its employees.

In the end, we will conclude that various efforts that Ford Company conducts have no significant result. The government suggested that the company join their program of work sharing in order to maintain existing company without the burden of large wages and benefits. However, in terms of unavoidable conditions, layoffs can be performed with cautious and a well post-layoff ‘treatment’.

VII.          Introduction

Ford Motor Company is one of the greatest names in the global automobile industry. The company was the pioneer in the manufacturing industry that boosted the trend of mass-production and became globally recognized in the automobile industry. The Ford Motor Company was built in 1903, when Henry Ford and his eleven business a ssociates agreed to form a single company. The business started slow and modest, with individual sales gradually increasing the corporation’s confidence.

It was not until the year 1913, ten years after the company was built, was the famous moving assembly line was first implemented. The invention enabled easier and more efficient method of assembling parts, increasing production capacity significantly and helping the company getting far ahead of their competitors (‘History’, 2006).

One of the company’s famous acts was to name their vehicle models using 19 letters of the alphabet. The most successful one is the T model created in 1908. The model spawned new trends that bring the Ford Motor Company to their place as a global industry leader. Another famous act was the acquisition of the Lincoln Motor Company, which brought the company into the luxury car market. The global expansion of the company continued until today, where the ‘Ford Family’ is now consisting of Ford, Lincoln, Mercury, Mazda, Jaguar and other well recognized brands (‘History’, 2006).

Recent reports however, indicated that the company had problems within their operations. Analysts and articles indicated that the company is currently performing a ‘reformation’ act, which will lead to massive changes in corporate operations for years to come. These changes are considered extreme by several observers due to their nature of involving thousands of jobs and millions of dollars of cash circulation. Within this paper, we will discuss the issue surrounding Ford’s makeover actions and how they would affect stakeholders of the company. The study is mainly directed to discuss Ford’s corporate responsibility toward its employees.

 

VIII.       Ford Motor Company Strategy

II.1      Economics of Scale

According to several articles and discussions, Ford’s strategy generally comes down to a single goal, economics of scale. Producing in the most efficient cost structure and in the most timely manner, and sell as many as they can is the main strategy as can be concluded from corporate actions. With this statement, I am referring to the fact that Ford’s production and pricing strategy are mostly directed to achieve faster and cheaper ways to build cars for market demands. For example, in 1996, Ford gathered 600 of its manager and employees from around the world for a six day meeting discussing about a brand new strategy. Within this strategy contains a product development strategy which is able to cut product time cycle from 36 to 24 months and reducing platforms from 24 to 16. The increase time-efficiency is expected to enhance the quality of Ford’s brands as a part of Ford’s larger global strategy (Smith, 1996).

 

II.2      Consumer Focus Processes

In one end of the process, creating an efficient cost structure is very important. Nevertheless, generating high sales number is also important to get the entire strategy to bring benefits to the company. There is a strong message within the corporate strategy that ‘customer is job 1’ (Washington, 2000).

In terms of pricing strategies, in 2005, Ford lowered the prices of some of their designs in order to attract larger market from internet and other markets. A total of 16 models were given cheaper price tags to enhance sales. This strategy was also implemented by the General Motors, who trimmed prices on 30 of their models to attract the electronic market (Carty, 2005).

In addition, to enhance sales, Ford also applies the Six Sigma system. The Six Sigma on Ford motor Company is directed to increase understanding toward customer’s preferences and thus enhance customer’s satisfaction (Washington, 2000).

 

II.3      Managing Partners and Suppliers

Ford is also known for their ‘family’ concept, where the company maintained good relationship with its chain of suppliers and partners in order to provide the highest value for customers.

Today, the company partners with TeleTech to develop individualized relationships with customers through their worldwide Customer Relationship Centers. Other visible partners are the UPS and the NewView. To plan for partner benefits, the company performs a partner recognition program to account for partners with unique relationship with the company (‘Partners and Suppliers’, 2006).

 

II.4      Changes in Strategy

Despite being known as efficient producer of cheaper cars in the historical days, there are considerable developments within Ford’s strategic directions today. For instance, the company is now also aiming to be the market leader in the luxury car segment. The Luxury division is established in 1999 to coordinate their luxury brands like Jaguar, land Rover, Volvo and Lincoln. Managers of the company believed that by coordinating these brands, the company is in the right position to become a major force in the luxury segment (Banks, 2001).

 

IX.             Ford Motor Company and Employee

III.1    History

The history of Ford’s relationship with its employees contains stories that generate both positive and negative sentiments toward the company. Nevertheless, I believe that the negative image was a lot more dominant and overshadowing the positive remarks.

 

III.1.1 Jobs to the People

Ten years after the company was born the company received tremendous benefits from the rolling assembly lines. It has become one of the most ‘revolutionary’ companies at the time. People were struggling to become one of the workers in Ford’s factories. By 1914, The Company had their rolling assemble lines to produce up to 600 cars daily. There was an income rose from 25 to 78 million from 1914 to 1921. Ford was recorded to produce up to 50% of America’s automobiles at the time. Henry Ford was a hero providing people with decent jobs and salaries.

Despite controversies within his method, Henry Ford brought stability and control that gave the company its early lead in the 20th century. One reason why the people were becoming more interested to work on Ford’s factories was because each worker was given a salary of $5 a day, which was a highly above average wages at the time (Peter, 1987).

 

III.1.2 Hardships on the Job

Nevertheless, the new workers at Ford were soon disappointed by the fact that the working condition was as hard as the pay was high, or even harder. Henry For was described as very possessive toward his workers. Workers are expected to work faster and harder. There was no democracy. It was either compliance to the demands of the company, or being let go. On eof the most controversial acts of Henry Ford is firing old workers just to get younger and ‘more efficient’ workers. This created considerable stress to Ford’s workers. The condition even generated a new trend of old employees dying their hair black in order to hide their age from evaluations (Robert, 1986).

Furthermore, as the great depression approached the world that day, Henry Ford ordered plant management to cut the $5 wages half and maintaining high standards of work. People were banned from whistling and talking during the job. The Ford Motor Company created a sociology department which formal goal is to make the workers prosper as the company had prospered.

However, this department was no other that a way to infringe more control into the factories. People we given extra benefits to do exactly what the department advice. The company was telling its workers how to live in exchange to the extra dollars of benefits (Robert, 1986).

 

III.1.3 Accusations

One of the most popular images about Henry Ford is his well-known attitudes. Besides being controversially protested due to employee manipulation practices, the man was also legally sued for threatening a Jewish competitor with racist words. The socialist system of his factories was addressed as infringements over the democratic rights of employees and laborers. One of the strongest factors that contributed to Ford’s negative image was the fact the henry Ford was hiring ex-criminals for workers and there were reports of other workers being harassed during union activities by this ex-convicts (Perlo, 2006).

These accusations finally brought the company to a significant downturn when Henry Ford was forced to apologize for his racist acts. The phenomenon cost the company its reputation and markets share. By 1931, Ford was only controlling 28% of the market, second to GM who controlled 31% (Marcus, 1987).

 

III.1.4 Changes

After the downward shift caused by lack of concerns toward employees’ interest, the company learned from their mistakes and bounce back by providing employees with one of the most rewarding benefit plans in the industry. The company’s principle is still producing cars with the lowest possible manufacturing costs, but the practice of new labor laws and regulations prevent the company from taking advantage of its employees like was apparent in the company’s historical studies (‘Ford Motor Company’, 2006).

However, the new system of stronger responsibility toward workers was apparently too much for the company as it brought the company to another problem of inefficient cost structures.

 

III.1.5 Evidence of Different Benefits of Ford’s Workers

The company was also questioned due to inequality of wages and benefits among factories of different markets. Different workers from different countries –and sometimes continents- have different levels of prosperity as displayed by the fact that some of the factories experienced multiple demonstrations from workers and some did not. For instance, in 2005, Russian workers were performing demonstration to have their demands heard by Ford’s management (‘Russia’s Ford’, 2005).

The Canadian factories were also recorded to experience a considerable turbulence due to employee demonstrations before finally an agreement was made between the labor union and corporate management. Even so, this agreement was becoming the spotlight of the industry for some time due to its imbalance nature. The Canadian workers agreed to one of the lowest rate of wages in the history of the union and the possibility of hundreds of layoffs (‘Canadian Workers’, 2005).

In Argentina, workers were even reported to receive the worst treatment among all other areas. Ford Argentina was strongly accused of having significant military ties which resulted in the disappearance and illegal detention of workers during the military regime. In detail, Ford Argentina was accused of having collaborated with the military juntas, which ran the country from 1976 to 1983 (‘Argentina Checks’, 2002).

Concerning the issue, therefore, Ford is found to perform inequality of workers’ wages based on Ford’s manufacturing facilities worldwide. Therefore, the above facts reveal that there are evidencse that the workers in the subsidiaries do not enjoy the same benefits as their U.S. counterparts

 

III.2    Present Issues

Starting sometime in the beginning of the 21st century, Ford’s managers realized that the company is carrying too much ‘fat’ and has a decreasing amount of profit. The response was a plan to significantly reduce company’s fixed capital cost while maintaining special focus on profitable segments. Unfortunately along the way, management realized that to produce acceptable level of profit, this strategy must involve a large amount of layoffs.

In 2002, the company announced its plan to cut more than 35,000 jobs worldwide. Some 28% of Ford’s workforce in North America, which is 30,000 hourly and salaried jobs, is scheduled for elimination within the next six years (Jani & Sustar, 2002).

This controversial decision receives various reactions from labor unions and the government. Labor Unions are offering pay cuts to maintain open factories in some states and countries. Some offers are received with significant notes while others were rejected. Management insisted that the cutbacks are unavoidable to preserve the workings of Ford Motor Company.

 

III.3    Causes of Layoff Decision

The decision to perform extreme downsizing activities is generated by pressures from various factors. They are as elaborated below:

§  First, globalization kicks in on the company. Several researches indicated that the age of globalization brings economies into a new trend, where services grew with a significantly faster rate than the manufacture business. Macro factors derived from globalization effects reduces growth of the manufacturing industry (‘Labor Market Trends’, n.d).

§  Second, more individualized consumers cause the lower rate of growth for Ford’s sales. Ford is no longer the brand that inspires Americans to go out and ‘buy a Ford’ as it did back in the early years. Average Americans prefer to buy individualized cars rather than having one that matches a certain trend.

§  Third, it appears that Ford’s current high rate of benefits and pensions to their employees backfired. It is mentioned that there is one retiree for every Ford employee today. High health care costs for aging workforce have eaten away corporate profit for 2005 (‘Ford Motor Company’, 2006).

§  Forth, external factors, such as the increasing price of fuel decrease sales numbers, where the company expected a high rate of profit from them. Furthermore, Ford is not well known for producing fuel-efficient cars, a market that significantly increases during the last years. The company is depending too much on sales of the sport utility vehicles segment. The previous trend in favor of SUVs and small trucks made Ford design their own line of sport utility vehicles. Unfortunately, this strategy fails in the market because sales number was far below expectations. One of the probable reasons of this downturn in sales is the increasing price of fuel which brought significant influence because sport utility vehicles tend to use more fuels.

§  Fifth, the diminishing number of sales resulted over capacity of many of Ford’s production facilities in North America. It is said that Ford’s factories in North America are operating at only 86% capacity compared to 107% of their competition, the Toyota Motor Corp. Management of Ford Motor Company stated that the downsizing program is crucial to address the excess capacity (‘Ford Workers’, 2005).

§  The Sixth factor is related to the downgrade of several bond ratings. These downgrades were recognition of both the high health care costs for aging workforce and corporate dependency toward the sport utility vehicles segment (‘Ford Motor Company’, 2006).

 

X.                Ford Motor Company and Leadership

The decision of firing many employees resulted in various reactions from the government and labor unions. Within this chapter, we will discuss concepts and expert opinions regarding downsizing activities and how the company should face such issues.

 

IV.1    Ford Family

Despite the solid reasoning, many observers still believe that by laying of 30,000 employees, the company is neglecting its responsibilities toward one of the most important stakeholders of the company. This argument is considerably strong remembering that the company proclaimed their concept of ‘Ford family’, which generally indicated a stronger commitment than what is currently displayed by management. Nevertheless, from various efforts involving contributions and suggestions from employees, Ford managers displayed that their sense of ‘family’ is not likely to vanish due to the crisis.

Nevertheless, there are still many disapprove that Ford’s ‘family’ concept is more than just advertisement. This is of course affected by the history of the company which is filled with violations toward worker’s rights, however, through their words and actions, the company displayed that taking advantage of employees are a thing of the past.

One of corporate effort that displayed the sense of family was Ford Chairman’s decision to provide a widely open channel for employees to give suggestion and ideas to get out of the crisis. This is considered as a huge change of culture that strengthened the concept of Ford family. Another act to increase sales that involves employees is the giving of rewards to employees and retirees that sponsored a friend or family to buy a Ford car in the year 2005. This is also company’s effort to maintain good relationship with employees and retirees.

 

IV.2    Discussions on Leadership

Discussions on Corporate Social Responsibility are growing in significance within the globalization age. People are getting smarter and more critical toward employers and how they threat shareholders. Corporations are also scrutinized in how their operations affect their surrounding environment, socially and environmentally. In terms of social responsibility, one of the most popular standards today is the Global Sullivan Principles.

 

IV.2.1 Global Sullivan Principles

According to the Global Sullivan Principles, a company should express their support toward human rights and particularly those of employees, communities within which the company operates and the parties with whom the company do business (‘The Global Sullivan Principles’, n.d).

With regards to this principle, there is a considerable reason to conclude that the Ford Motor Company has not performed any violation of human rights toward its employee. This is true because despite the final decision of lying off thousands of workers, the company has visibly performed all efforts available to increase sales.

However, the fact remains that the company failed to provide its employees with adequate compensation, which lead to layoff decisions. This means that the company has not practice the ‘sustainable development’ concept –as mentioned in another principle within the Global Sullivan principles- properly which caused workers their jobs (‘Global Sullivan Principles’, n.d).

 

IV.2.2 Effects and Origins of Layoff

According to a study by Kevin R Foster (2002), which examined a number of massive layoffs, after the layoffs, profitability generally declined relative to the industry for 65-75% of the firms. This decline generally continued for three years after the layoffs. Nevertheless, the study mentioned that the decline might not be directly caused by the layoffs, but rather have precipitated them.

In line with this conclusion, a journal by Eileen Applebaum (1996) stated that downsizing is not necessarily and effective way to maximize shareholders value. The journal stated that profitability is a gradual process and there is no actual ‘quick way’ to obtain it. Furthermore, the journal stated that there is no company that can credibly claim that productivity requires sudden employee layoffs. Nevertheless, in the situation where the process is inevitable, there is also a way to plan this type of reduction without causing significant damage on individuals and communities.

Wall Street once equates efficiency with layoffs. The result was almost half of the productivity gains in US economy come from adding employees instead of reducing them. Furthermore, Surveys by the American Management Association revealed that most downsize do not provide companies with the targeted goal of efficiency. Downsizing tends to be a more acceptable solution to the crowd. However, a study comparing financial performance of a downsized firm before and after layoffs indicated that the companies do not perform better in two years after the layoffs compare to three years before the layoffs. Studies indicated that downsizing is most often a cover for mismanagement rather than an actual solution (Applebaum, 1996).

In line with the studies above, according to F. John Reh (2006), Job cuts do not actually reduce expenses. Several studies indicated that the cost resulted from cutting down labors exceed the amount of money saved from the payroll of the ‘removed’ labors. He also stated that layoffs reduce corporate performance and will cause diminishing value of the company in the long term. More over, he stated that massive layoffs will create uncertainties within the atmosphere of the corporation. These uncertainties will cause employees and managers to question their presence within the company. The first people that would leave are the best ones, because they could always get a job somewhere else. In the end, the company will be left with the worst employees with minimum productivity.

In conclusion of these statements, Reh reminded readers that people are assets of the company and should not be viewed as burden. Laying off employees should be considered a last resort rather than a part of a solution. Reh stated that managers that choose layoff decisions are basically bad executives that cannot discover better ways to take advantage of corporate resources (Reh, 2006).

 

 

 

 

XI.             Change

V.1      Need to Change

As revealed above, various studies indicated that layoffs are mainly resulted from managements’ error. Thus, acknowledging the size of layoffs performed by the Ford Motor Company, the company needed to perform significant efforts of redesigning the business.

In previous times, the company was successful due to a strong leadership by the founder of the company. Henry Ford’s style of leadership –strong, independent and controlling- brought the company into its recognized position as a global player within the automotive industry.

However, today’s market is significantly different from Henry Ford’s time. Management need to make considerable adjustment to design a corporate strategy that fits to today’s market conditions. Sometimes, assistance from the government is also required to present an effective result from the strategic change. Below are several of those strategies.

 

V.2      Efforts of Increasing Sales

Within the difficult times, Ford Motor Company performed several efforts to increase corporate sales and profitability. One of those efforts is as described by Christine Tierney (2005) to the Detroit News. In 2005, the company offers employees and retirees up to $ 1,000 in cash for encouraging relatives and neighbors to buy vehicles wit employee discounts. Each of the 300,000 employees and retirees were allowed to give special prices to 8 people within the year. For sponsoring the first buyer, the employee/retiree is entitled to a $50 reward. For sponsoring the second, the employee/retiree will accept $100 and so on until the eight buyers, which will generate the total of $1,000 dollar reward. This effort is similar to the one performed by the General Motors Corp.

The company evens asked for suggestions from employees to face the slump on SUV market. Considering the history of corporation this is a significant cultural change to the positive direction. The Chairman of the company is reading hundreds of e-mail received from employees of all levels. According to the Chairman, this is not intended to be a quick way to discover a solution but it is more a gradual effort of encouraging entrepreneurial spirit through the company (Hoffman, 2005).

Nevertheless, these types of efforts would not significantly alter the conditions of the company. Ford will still need to perform its massive downsizing and let go of thousands of employees under its wings. Thus, stronger solutions are required to become alternatives to the layoff decision.

 

V.3      Alternatives to Layoff

Some state governments generated an idea that could ease the pain caused by layoffs. In simple explanations, the program suggested that instead of firing several people, companies should make existing employees to give away their working hours. For instance, instead of cutting 20% of the existing worker, companies could cut off 20% of every workers working hours, therefore, preventing some workers to be totally unemployed (Cadrain, 2002).

Nevertheless, this strategy would not work in the long term, because the workers will demand full time salary. Therefore, local states are performing a program called the work sharing program. The program placed local government in authority for distributing the remaining 20% ‘loose hours’ of the employees, until the employees received similar 100% wages. The advantages of this program are as follows:

§  It minimizes or eliminates layoffs and reduces unemployment rate

§  Helping business to maintain trained employees and save money for training new employees in the future

§  Allowing a more flexible arrangement for unstable times and allowing employees to be prepare for an actual layoff.

§  Due to its flexibility and simplicity, the program can be used by almost any type of business in every industry. The program s is currently booming in several states of America.

(‘Work Sharing Unemployment’, 2005)

 

V.3      Managing Post-Layoff Employees

On the other hand, if layoffs are absolutely unavoidable, there are several actions to manage employees after the layoff process. According to Melissa Shaw (2002), the most important aspect of managing post layoff companies is communication. Lack of open and honest communication will cost the company more employees after the layoffs, more often, the best ones. Besides open and honest communication, there are other activities necessary to manage a corporation after layoffs, some of them are:

§  Providing opportunities for counseling. Some of the remaining employees might feel a little disturbed after layoffs. They might require someone to talk to and express their thoughts or suggestion. It is better to provide these people with some kind of Employee Assistance Program that would pose as a neutral third party (Shaw, 2002).

§  Providing employees time to adjust to their workload and responsibilities. If the remaining employees are required to receive a heavier workload, then management must understand that quality might have to suffer for some time before the employees become accustomed to their responsibilities (Shaw, 2002).

§  Maintaining reward and recognition programs like holiday parties, summer picnics, etc. however, if the condition seemed inappropriate, we can always turn the events into simpler recognition activities (Shaw, 2002).

§  Do not make the mistake of assuring employees that the worst is over and jobs are secure. This action will backfire when the company is forced to perform another downsizing. It is better to inform employees about necessary actions required to prevent future layoffs (Shaw, 2002).

§  Changing leadership style is required. Managers are suggested to recognize the problems and admit them to the entire team. Pretending that the company is OK will create a sense of dishonesty which will drive people away. Keeping matters real and communicating them openly with employees is a better approach. Changing the way the company is operating will send a positive image that problems are acknowledged and in schedule to be solved rather than being sweep under the rug.

 

XII.          Conclusion

Ford Motor Company is the pioneer in mass production of vehicles. During its early days, the company was recorded to perform several violations to workers rights. However, the tough leadership style brought the company to become a recognized leader in the automotive industry.

Afterwards, as competition became intensified, the company treated their employees in a lot better manner and even with considerably high health benefits and pensions. Corporate strategy revealed that the main focus in on economics of scale and efficient mass-production activities. However, it has been reported that employees from different countries received different treatment from the company. Overall, the image of the ‘Ford family’ concept is rather tainted.

In the more recent operations the company experience downward trend in its SUV segment which created a significant loss. The Chairman of the company stated that they are about to layoff 30,000 workers in six years time due to the depressing conditions. Nevertheless, several studies indicated that layoffs are more a cover-up to management’s faults than an actual solution. Therefore, a change in leadership is needed to change the condition of the company

Various efforts have been performed by the company with no significant result. The government suggested that the company join their program of work sharing in order to maintain existing company without the burden of large wages and benefits. However, in terms of unavoidable conditions, layoffs can be performed with cautious and a well post-layoff ‘treatment’.

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