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Reasons for Ford to Decline

Reasons for Ford to Decline

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Published by: sweetbird_161162 on Mar 05, 2010
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11/24/2010

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Reasons for Ford to decline
Ford, have been on decline due to many reasons, such as, discount reliance,mismanagement, the burden of union pensions, a lingering quality gap with the Japaneseautomakers, and the strength of Toyota and Honda in the U.S. market.Ford also faces new competition from the South Korean automakers, which were barely adot on the horizon a decade ago.One major reason for Ford failure was its Detroit system, mass production who replacedcraft workers with assembly line. The threat arrived in early 1980s, when foreign firms,such as Honda and Toyota started mass production in American soil. Compared toAmerican way of working, which is always on grand scale, the Japanese automakers hada different outlook.For example, Ford assumed that profit should equally be distributed among the entireworkforce. The companies also had union leaders who negotiated pension and other  benefits with management, which worked well for decades and it was assumed that thissystem would work eternally, which was far from being a right approach in changingtimes. Toyota on the other hand had a different way of working. The company did notshare every penny among its workers like Ford did. Instead it offered premiums toworkers. They believed that it was unrealistic to promise benefits of future that were notcertain. Thus instead of paying pension, they made payment on the basis of contribution being made during work, which did not put any burden on their financial system. On theother hand, Ford had to pay benefits and compensation, even when they were in declineand workers were also no longer contributing any thing which added to their woes. Thisled to crippling pension costs and overburdening the Ford automakers.Another problem since 2001 has been auto parts supplier pressure, which is coming fromChina. Even though the local industries are able to manage the pressure from suppliersfrom China, but the impact of it is enormous. However the US automakers have todevelop new strategies to fight back the Chinese. The reason is that foreseeable futureautomotive demand. A lot of Japanese companies are setting up their companies in thedeveloping world to meet the demand in China, India, South America and SoutheastAsia. The US auto companies are even late in these markets. Ford has some plants inChina and other Southeast Asia countries, and GM has also pledged to develop $130million parts factor in Shanghai, however it is much lower to meet the expectations of thedemand. Japanese have made huge investment, such a Honda assembly plant in Thailandand Indonesia and Pakistan.The problem with Ford and other local US companies is its size, history and total share of the market without any rival. The US automakers have dominated the US market for almost a century without a single rival, during which they little changed and whatever they made was sold. Consumer had to buy from them, as they had no alternative.However over time, this trend changed and American market became a battlefield, whereUS automakers were faithfully practicing their old dogmas. Japanese companies changed1

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