Introduction
The Ford Motor Company reported a net income of $997 million, which was a surprise to the financial market because the Wall Street forecast was that the company was to report losses. The company shares went up by eight percent due to this good performance. Ford is the only automobile manufacturer that did not file bankruptcy in the United States during the current period of financial crunch. The company management said that they are planning to raise its capital by $3 billion by the year 2013. The firm’s profit reports have shown that it has distanced itself from its competitors in the United States who are struggling with restructuring after receiving government funding to save them from bankruptcy (Reuters, 2009). In this paper, I will examine what is behind Ford motor company’s good performance in these economic hard times.
Restructuring program
The Ford Motor Company through its restructuring program has been able to bring down the automobile structural cost by $1 billion during the 2009 financial period. The reduction in the structural costs has made it possible to bring the company operational costs down, which has seen very positive results to the company’s profits. The company has been able to push the engineering and manufacturing cost lower which is a reflection of the company’s improved productivity (Dolan & Bennett, 2009).
Strong products lines
The Ford Motor Company has also managed to build strong products lines which have enabled the company to improve its market share in Europe and North America. The company has also been very successful in improving its transaction costs and margins in many areas of its operations; this has made the company profits soar up in various profit centers. The firm has also managed to build its brand through its product development program that has seen its sales go up even in this time of financial meltdown (Snavely, 2009).
The rise in the profits
The rise in profits can also be explained by the reduction in the number of employees in North America and Europe. This has brought the operating cost in these areas down because the pension and retirement benefits also went down.
The company in North America alone in the third quarter reported $357 pre-tax profit which is a big improvement from $2.6 billion losses in 2008. The good performance has been attributed to the company’s constructive net pricing of its products and lowered material costs in the region. These have made the company to be able to check on its operating cost and improve on its earnings. The good performance in North America can also be attributed to the increased market share of the company product which has resulted from the good market mix and promotional tools in the marketing department. The strong marketing mix has made the demand for the company’s products soar up which has led to improved profits (The New York Times, 2009).
Conclusion
According to the company report, the overall good performance can be attributed to the company program to cut costs in its areas of operations. First, there is a reduction in the cost of supporting staff due to the reduced number of employees in the company operations. Second, there is a reduction in the structural cost in automobile productions. These reductions have enabled the firm to cope with the hard financial times in the world markets. The company has also managed to boosts its market share in many places around the world through its aggressive marketing drive (Ford motor company, 2009).
Reference List
Dolan, M. & Bennett, J. (2009). Ford Stirs Hope of Car U-turn, Dow Jones & Company, Inc. Web.
Ford motor company (2009). Ford Posts Q3 2009 Net Income Of $1 Billion; Cash Flow Turns Positive; North America Profitable, Ford motor company. Web.
Reuters, (2009). Ford posts surprise profit, Thomson Reuters Corporate. Web.
Snavely, B. (2009). Ford’s quarterly profit nearly $1 billion, AllBusiness.com, Inc. Web.
The New York Times, (2009). Ford Motor Company. The New York Times Company. Web.