Quality Issues in Ford Motors Asia Pacific: Environmental and Other Factors Report (Assessment)

Introduction

Ford Motors Asia Pacific is one of the many branches of Ford Motors Corporation that serves the countries in Asia Pacific. Worldwide, Ford Motors has been rated the second motor vehicle manufacturer according to Standard & Poor’s. But Ford encountered external and internal problems which hampered its growth.

Ford Motors was started in the United States of America with Henry Ford as its founder. Henry Ford introduced many innovations in manufacturing.

One of these is the best-known Model T of mass production, the moving assembly line – which is actually composed of conveyor belts – where time of work was reduced. Ford further revolutionized the car industry, paid higher wages to factory workers, and made cars affordable to anyone.

The company became a multinational corporation in 1970 but was predominantly operating in North America with subsidiaries in major markets in countries like Britain, Germany or Australia.

These subsidiaries however have their own manufacturing plants. With intense globalisation, the Ford organization started to restructure internationally. In the Asia Pacific region, Ford was consolidated with further product development and designs which were originally Asian.

Ford is best known in the United States for its cars, trucks, crossovers and SUVs (Ford, 2010). In 2008, Ford was adjudged by Standard & Poor’s (2009) as the world’s second largest motor vehicle manufacturer, producing cars and trucks, including plastic and glass parts of the cars they make, and replacement parts.

Financial services included Ford Motor Credit (automotive financing and insurance) and American Road Insurance. Ford has a big share in the world market. It has a 33% stake in Mazda Motor Corp.

It has ventured in many countries, trying to feel its presence even in China, which is the fastest growing market in the automobile industry.

Ford has planned to grow and expand in Asia, particularly in Thailand and other emerging markets in Asia, as announced by CEO Bill Ford. (Business in Asia.com, 2005)

Quality Imperatives

One reason why Ford Motors declined in sales and has lost a considerable place in the competition is due to lack of quality in many of its cars. Quality imperatives for Ford Motors have to be discussed in the light of the present decline in customer loyalty and therefore sales.

The Economic Imperative

Automobile industries around the world have a great part in the nation states’ gross national product (GNP), accounting for at least ten percent or more. These industries have evolved and encountered many changes over the years.

Economic imperatives can cut down the quality of a firm’s products. Ford Motors was once the world’s leader in vehicle manufacturing but with the recent global economic downturn, there are doubts as to its leadership and the quality of the cars that it once manufactured and delivered to its loyal customers.

Recently, Ford Motors needed government bailout in order to survive and stay in the competition. The government of the United States had to reinforce financial losses because of the purported mass layoff of customers.

As we know, the automobile industry is a labour-intensive industry, and if one car-manufacturing company closes down, it will have a great impact in the economy.

In the Asia Pacific region, Ford Motors has made its mark by addressing the demands of the riding public or the growing interest of customers to Ford products, including parts and servies.

Ford Motors is a knowledge-based, global firm, the world’s second in the automotive industry. General Motors was once the world’s leader in vehicle manufacturing but with the recent global economic downturn, there are doubts now to its leadership since it needed government bailout.

Ford has a reputation of high sales in new light vehicles, but its leadership has been threatened by the increase in competition by Asian companies, the Tata Motors from India, and the merged companies in China.

There is also a shift from the large SUV to smaller crossover utility vehicles (CUVs). In 2008, Ford has to introduce its own CUVs. In 2010, Ford has diversified some of its vehicle designs, such as the CUVs.

With market shares down, Ford started to restructure plans so that it could lower down the costs of production and operations. Ford made a shabby performance for its corporate strategy in 2008-2009.

The reason for this is that it received some obligations out of its partnership with Visteon Corporation, the parts manufacturing firm to whom Ford had some obligations that had to be ironed out. It had to face additional expenses at a time when it was struggling to reduce costs of production and operations.

Out of these transactions, Ford acquired 23 manufacturing plants from Visteon which were considered additional obligations and not real assets. Standard & Poor’s (2009) says they were money-losing plants delivered to them by Visteon Corporation.

Ford had to provide financial assistance to this company in exchange for warrants for company shares of Visteon. It was not a good deal after all.

Social Imperative

Quality is as important to the company as to the community and the loyal customers of Ford Motors. In some countries, public services particularly the transportation sector is being held by government-controlled corporations. There is discontent and lack of quality in this kind of service.

Governments are trying to decentralize or liberalize transportation to infuse quality in public service. (Beckford, 2002, p. 6)

Since the beginning of the industry, stiff competition has always been a big challenge for Ford. One of the fiercest competitors is Toyota, a fast growing company and a threat to American car manufacturers.

Toyota has been in the forefront of car making because of an effective strategic and operational management coupled with an efficient and competitive workforce. Toyota strategies involve innovations in production, marketing, sales and promotions, and branding.

But to top it all, it has been able to handle knowledge management like it is a part of ordinary business. Along with a determined workforce, Toyota introduced the kaizen and kanban concept of production.

Kaizen means “continual improvement”. Toyota engineers cut or shortened some stages of production to save time and provide flexibility. (Gourlay, 1994, p7, cited in Lynch, 2008, p. 773)

Western companies have to adapt to the emerging markets in Asia or what are now called the “Tiger economies of Asia”, like Singapore, Hong Kong and Taiwan. Emerging China and India are a temptation for the industry players. Organizations that want to penetrate these markets have to infuse quality in their products and services.

Ford also has a problem of dealing with labour unions, and this is one big challenge in the years ahead. The automobile industry is one of the most labour-intensive industries in the world. Labour unions have to be dealt with squarely and provided affordable benefits.

Environmental Imperative

Ford has to adapt to technological advancement and continuous innovations; this sacrifices the environment. In many parts of the Asia-Pacific region, Ford has manufacturing plants and production facilities. However, it also outsources many of its parts from mainland China.

Outsourcing and in-house manufacturing both have repercussions on the environment; but it all depends in the management and the programmes and policies of the organization. This is one of the challenges of Ford Motors Asia Pacific. Environmental degradation is one of the outcomes of manufacturing.

Moreover, cars of all sorts produce carbon dioxide emissions which are harmful to the environment. Greenhouse gas emissions have been the topic of various international groups to reduce climate change and global warming.

The automobile industry has been characterised by intense competition, lower market share, and there are many products coming from different competitors.

Other environmental forces include high prices of gasoline and a sudden change in the demand for Ford’s pick-up trucks. Ford’s sales were down during the period 2008-2009. (Standard & Poor’s, 2009, p. 211)

The rising costs of manufacturing have forced car makers to find ways and implement innovative solutions. Outsourcing of parts and car components is now a trend, and many of them have merged or used companies in China which manufacture cheap parts.

Strategic Importance of Quality

The operational and administrative functions of a corporation should reflect the quality policies of a corporation. The other important levels include strategic and normative levels which must also reflect quality policies as significant as the operational and administrative levels. (Beckford, 2002, p. 15)

During the initial period of the 2009 recession, Ford’s products were becoming less in demand; it needed successful products to be on the competition again. This is one of the most important needs for Ford. According to Standard & Poor’s (2009, p. 211), Ford lost market shares in 2008, the problem, quality.

On supplier development, Ford management has realized the importance of supply chain. Some of its automotive parts are being outsourced from China.

Ford Motors has realized that supply chain management excellence is crucial for customer satisfaction. Understanding customers is critical to their satisfaction and loyalty. Product innovation is one of the solutions. Supply chain learning should be a part of the firm’s strategy.

As stated earlier, Ford had practiced outsourcing in production and manufacturing. Many of the of a Ford vehicle are outsourced from China. The process of outsourcing has reduced the quality of a product.

The level of operational management has reduced the quality of Ford’s cars and vehicles. This is also affected by the processes of supply chain that Ford has practiced all through the years. In the Asia Pacific Region, Thailand is one of the center points or the source of Ford cars. Cars are assembled in the Philippines and shipped to Thailand. (Business in Asia.com, 2010)

This is majority of the orders from customers are coursed through the Thailand branch of Ford Motors. Parts come from China and the Philippines but assembly are done in the Philippines. This process hampers quality in the operation.

Parts pass through many barriers before they can become functional in the core product. Quality is sacrificed in order to reduce cost.

The level of administration which defines the control and allocation of operational resources affect the quality or the outcome of the product. There is lack of balance in the level of administrative management at Ford Motors Asia Pacific.

They rely much on technology, such as the Internet and Information Technology, and other tools such teleconferencing into order to communicate with employees.

There is still vertical set up or integration, and decentralization is not yet an option, making the operational process a hindrance to the produce quality products for Ford Motors Asia Pacific.

The level of strategy is also disadvantageous. Ford’s vehicles are not anymore the quality-oriented vehicles that it used to be. During 2008, revenues fell and it was not yet clear when it was going to go up.

This has been made complicated by the supply and demand scenario. Up to 2010, there has been a weakening demand of cars in the United States and Europe. (Standard & Poor’s, 2009 p. 212)

This is one of the reasons why Ford Motors Asia is pushing for growth and expansion. The management believes the emerging markets of Asia can drive the growth of the company.

The level of normative management which is responsible for the ethical issues and the expectations of the community on the organization’s programs and actions, also affect the performance and the quality of its services.

Ford Motors Corporation made some mergers and acquisitions which were quite not sure if the company and the community benefited at all.

Globalisation impacted on the automobile industry which resulted in mergers and acquisitions of well known car brands. Ford acquired Jaguar and Volvo and also partnered with Mazda Motor Corporation. (Plunkett, 2006, p. 18)

But these acquisitions produced negative results to the general public in the sense that the quality had to be sacrificed. Many of the cars which were the results of mergers were not performing well.

Quality Philosophies

W. Edwards Deming

Philosophies on quality centred on Deming’s failure to convince the American manufacturing sector in his ways of quality and methods. Deming’s quality methods were rejected by the American industry strategies. He wanted that management should focus on manufacturing processes that should have constant variations.

Quality, according to Deming, can have common and special problems. Examples of special causes are the ones which are caused by machines that need special attention. Common causes are systems causes and which should be looked upon by management. (Beckford, 2002, p. 66)

Deming’s philosophies were widely accepted in Japan; that is why he was considered a hero in that country. His methods became the basis for Japan’s quality processes.

The Deming Prize was formed to determine and define quality in production and manufacturing. In 1960, Deming was honoured with the Second Order of the Sacred Treasure, an honour bestowed upon him by the Imperial Majesty. (Beckford, 2002, p. 67)

Philip B. Crosby

Crosby stressed the importance of quality in the design of a product. There are organizations that should first solve its own troubles before they can infuse quality in their products. Crosby (1984) outlined the characteristics of troubled organizations:

• One common defect of a product that reflects a problem organization is that the product deviates from the normal requirements, including the announced or published ‘make’ of the product. There are inconsistencies in the product that when it goes to the customer, the latter finds it difficult to use or adapt.
• The company employs dealer networks that try to infuse some corrective actions on the product. This occurrence will result in the product being introduced with many innovations. It may result in the dissatisfaction on the part of the customers.
• The company does not have a clear program for quality allowing the employees to provide their own quality standards on the product. The job is supposed to be the job of management but employees are forced to do it for the management.

Ford Motors Asia Pacific has its own standards that it cannot be said that its cars declined because of lack of quality standards. As said earlier, there have been some factors that resulted in the dwindling of the quality of Ford vehicles.

Quality Tools and Strategies

Statistical Process Control

Deming advocated the use of a tool called statistical process control (SPC) charts which can be utilized to identify the special and common causes of quality problems. Deming wanted to identify and eradicate the so-called ‘outliers’. These are the problems in quality that can identify special causes.

Some of the remedies include training and good maintenance of machinery and equipment, and other possible means for improvement. Other problems can be considered common problems or causes and can be pinpointed to the system which is the production process.

Statistical process control literally means bringing the processes “under control”; that means the production processes or other activities involving product quality should be controlled in order to find solutions to problems.

Pareto charts are used to diagnose the problems in the production processes and identify the problems, and find solutions to the problems.

The Malcolm Bridge Award

The Malcolm Baldridge Award is a set of criteria that provides guidelines for the effective operation of an organization. It was originally intended for the manufacturing processes but later it evolved and is now applied to other service organizations including educational, health care and non-profit organizations.

The military also uses the Baldridge Award in infusing quality in their branches or to assess the different departments. Federal governments also use the Baldridge to assess the different agencies of the government.

States of the federal government have made Baldridge-inspired awards to remind personnel and organizations of the importance of instilling quality in their jobs and services. (Brown, 2006, p. ix)

Human Resource Management

Human resource management must be a major activity of an organisation because it was created to promote and pursue the aims and objectives of the organization. It also aims to have a quality human resource that will sell its products or serve the customers.

HRM was not a regular part of management personnel a few decades ago; the job of HRM was performed by personnel management. Now, an organization cannot function well with human resource management.

This function and part of the organisation identifies the organisation itself. If the people are not well trained, then that organisation is not an effective organisation.

Human resource management is the proper handling or management of the organization’s most valued asset, the people working as a team. It is the responsibility of management and the people working there to work as a team for the promotion or furtherance of the organization’s objectives.

In HRM, there is the central involvement of middle and low level management in order to have a good relationship with everyone working in the organization.

Emphasis is on people management, from top to middle- and low-level employees, and a division of labor in the handling of people in the workplace and in the field.

Human resource management should provide Ford Motors Asia Pacific with the necessary management strategies and tools for an effective implementation of product quality.

Management of Quality

In order for a workforce to be effective, there has to be a careful and deliberate workforce planning and employee development. Workforce planning is the initial stage of training and development and is an important aspect of human resource management.

Organizations have to introduce various changes in their marketing strategies, product orientation, employee management, and other organizational strategies. Cultural diversity is a trend in the age of globalization.

And organizations have to choose between adaptation and standardization in their products and marketing strategies in order to gain an edge in the competition. The demand for localized products is also growing.

Adaptation is one innovation that global organizations have to apply in their marketing strategies to adjust to cultural differences.

Since Ford Motors Corporation is penetrating Asia Pacific, it has to adapt to the local culture and the changing demographic in Asia and the emerging markets of China and India.

Deming introduced method which is the systematic process to solving problems of quality. His ways were copied and used in such processes as the EPDCA cycle in Oakland’s work. This method is used in the application of the standardization, the ISO 9001, 2000.

Deming’s method is the PDCA cycle or “plan, do, check, action”. This is also connected to Crosby’s process, which is to repeat the process.

This approach is considered a re-emphasis of management’s responsibility to focus its attention to infuse quality in its many activities. Logothetis (1992 cited in Beckford, 2002, p. 67) stressed that it can be considered a basis for a quality program which is self-sustaining.

Total Quality Management

Total quality management is a management framework that encompasses different areas that ensure the benefits of business are delivered to the fullest.

There are six concepts developed over the years by experts in the field of management, some of which are inter-related and connect to the concept of quality management as expounded in the previous sections related to Deming and other quality gurus of the century.

The six concepts are mentioned by Hakes (1991), and these are:

• Customers – the concept related to customers include external and internal; internal because there are customers inside the organization that need or patronize the product, while external are those not belonging to the organization that buy or patronize the products. The organization should focus along these two customers.
• Never-ending improvement – This refers to continual improvement on the product and the workplace.
• Control of business processes – There must be control of the production to ensure quality.
• Preventive Management – This may refer to upstream or looking for possible problems that may come along the way.
• Preventive action – this is done to institute corrective measures while the problem is about to occur.
• Leadership and teamwork – The leader and his team should be able to work together to provide quality product and service for the organization.

ISO Quality System Standard

The International Organization for Standardization is a standardization body that verifies the quality standards and compliance of organizations. The ISO 9000 certification is issued by the Standards Body to firms and organizations that comply with the procedures of the Body.

This is not a compulsory certification, but organizations adhere to the procedures and submit for certification in order to raise their standards of quality and excellence. Organizations which are issued with this certification improve their performance and raise their competitive standing to their particular industry.

Ford Motors’ Quality Problems

Ford made some mergers and acquisitions which were financial flops. As a result, production of quality products was sacrificed. In December 2005, it sold its Hertz Corporation unit for $15 billion.

Ford’s finances for the future were to be diluted with this sale because according to Standard & Poor’s, Hertz contributed to Ford’s profits.. (Standard & Poor’s, 2009, p. 213)

Mergers and acquisitions (M&A) should be properly planned and executed. There are many requirements and preparations before the actual execution of M&A. M&A should not be executed for the sole purpose of expanding (because this is now the age of globalisation) or to fulfil the goals of some ego-boasting managers.

Careful study and preparation can minimise financial losses and prevent the flight of significant and top talents of the organisations. There are long-term benefits that a firm can attain, not just market share gains.

One is the vital core competency as a “Great Acquirer” with benefits such as financial, managerial, and reputational aspects of M&A moves. Great Acquirers are approached by competing companies if they have such reputation.

Ford had also trouble reaching an agreement with the labour union, UAW. It was crucial and one that involved life or death, and it still is a question whether Ford chose the former. In Asia, some labour problems occurred in China because of the big demand of labour in the automotive industry.

Conclusion

Intense competition, a lowering of the market share, and gas hikes have characterized the dilemma in the automobile industry in the different areas of the globe. Some of Ford’s cars are no longer selling.

With the recession, car and vehicle lovers wanted affordable cars, but full of quality. For instance, in India when there has been a desire for cheaper cars, Tata Motors manufactured the world’s cheapest car, the Tata Nano, but it was not selling.

Ford penetrated the India market, made some acquisitions, and introduced its own small cars at a time when Tata Motors was not reaping the gains of the cheapest cars in the world. Ford announced to build a new model, the Figo. (Canis, 2011, p. 49)

The Indians were laughing at the Tata Nano cars. Many commentators have said that Tata Motors’s manufacturing of the small cars was a mistake. The cheap cars flopped.

Ford Motors follows the present trend in global organizations, the horizontal structures of business organizations. The traditional structure uses the vertical set up where top management takes the reins of power from the top down to the low level employees.

Ford Motors have subsidiaries worldwide, a characteristic of multinationals. However, these subsidiaries have their own independence. They manage and rule themselves and manufacture their own products.

In terms of work and life balance for the Ford employees and workers, Ford management may have done its share of promoting the well-being of its employees and providing inspiration and motivation. The management believes that when people are motivated, they accomplish goals.

Workers become productive when they feel they are a part of a team, or part-owners of the organisation. They feel this sense of belongingness and so they strive for the organisation’s improvement. They do not regard money as an objective, and work becomes a part of life.

However, the Ford management has not yet freed itself from the traditional form of management. Some members of the Board are chosen from the members of the Ford clan and decisions are biased to the side of the family rather than the organisation.

References

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