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THE CORPORATE

EVOLUTION OF THE FORD


MOTOR
COMPANY OF CANADA
1904-2004
SARDAR KHAWAR

ADNAN AHMAD

ABOUT THE COMPANY

Manufactures and distributes automobiles on six continents


Employs approximately 224,000 people and operates 90 plants worldwide.
Brands include Ford, Lincoln, Mercury, Volvo, Mazda and Ford Motor Credit
Company (financial service).

FORDS BRIEF HISTORY


1903 Ford Motor Company founded in Michigan
1908 Model T introduced
1913 first moving automobile assembly line in the world
1956 Fords stocks go on sale (10.2 million shares sold the first day)
1987 beginning of the acquisitions of other brands
1988 Ford Motor Company reached the peek

THE ERA OF AUTOMOTIVE PIONEERS:


FORD OF CANADAS BIRTH
Ford already lost two companies

In return for granting the use of Ford patents and drawings , the stockholders
of the Ford Motor Company received 51 percent of Ford-Canada, divided
according to their original Ford-U.S
By that point, the Company had become the most profitable enterprise in the
world
Henry Ford and his investors were millionaires
Model T was the most successful car in the industry

CONTINUE
Ford-Canada's operational tone and relationship to the American firm was set
very early
Company's management acted largely independently of Ford-U.S
The two companies operated as distinct entities

For example, Ford-U.S did not produce a two-door Model T in some years,
while the Canadian company produced four-door Model T's
The 1904 agreement granted Ford-Canada the exclusive right to "manufacture
and sell" Ford products in the British Empire

NOT A BRANCH PLANT: FORD AND THE


POLITICAL ECONOMY OF THE CANADIAN AUTO
INDUSTRY, 1900-1920
High duties ensured that the Canadian auto sector grew up as a "creature of
the tariff,

In 1904, McGregor was keen to provide Canadians with a reliable, workable


vehicle, while Ford in Detroit already had the technology, and, most critically,
the product.
The Canadian venture would cost Ford little beyond sharing his production
and engineering plans and providing his "services" to the Canadian company.
In exchange, Ford would share in any profits that the Canadian company
might generate in the future, and Ford vehicles and the Ford name would be
popularized in a neighboring market.

CONTINUE
By 1909, the tariff had not yet come to pass
As the original Canadian automotive "early adapter," McGregor established a
Ford operation in Canada
McGregor was in charge of the Canadian operations, Ford allow his Canadian
counterpart to continue the managerial approach of "one-man leadership
Ford had not allowed any public ownership in the European companies

THE PROBLEM OF FORDS CANADIAN


OWNERSHIP, 1920-1940
Henry Ford took little interest in the Canadian firm

His only son, Edsel, was keen to bring the company under the parent firm's
control
Campbell proposed that Ford family utilize the unissued voting shares that
remained in Ford-Canada's treasury to control a "voting trust
Campbell was in fact keen to see the Ford family have "returned to them the
voting control originally contemplated in the 1904 agreement
Campbell did not consider that Ford of Canada's independent status was
harming the Ford family, but he felt that the Canadian company would be best
served by remaining a Ford-controlled entity

CONTINUE
Campbell admitted, without Ford's ingenuity and the American Ford Company's
successes, the Canadian company would be nothing
"Anyone closely identified with either the American Company or the Canadian
Company knows that the Canadian company can only carry on business provided
the Canadian company has the full co-operation of the American Company and
those associated with it
By 1930, Edsel had purchased another eleven thousand voting shares, bringing
his control over the voting stock of the Canadian company to 47 percent.

THE ERA OF ORGANIZATION MEN: FORD GAINS


MAJORITY OWNERSHIP AND ORGANIZATIONAL
CONTROL OF FORD-CANADA, 1945-1965
Edsels ascendance, transformed the Ford Motor Company into a modern,
professionally managed organization, also had a significant impact on the
relationship between Ford-U.S
Purchased blocks of shares on the open market and from the Ford family,
giving the Ford Motor Company 52 percent of the voting shares of FordCanada
The company expanded the board from five to seven members

The Canadian company was quite receptive to the new arrangement, which
substantially curtailed its operational independence in a host of areas

CONTINUE
In early 1950 Roberge informed the Canadian management that "under the
new relationship agreement dates as of May 1, 1949, it will, of course, be
necessary for to supply the Associated Products organization with information
concerning your company's activities
Established Ford International in New York, to "give coordination, advice, and
assistance to all Ford international activities" and to streamline the company's
international organization and control
Ford-Canada, as a unique entity within the Ford Empire that exported
products to its "exclusive territories," did not easily fit into the new
organization

CONTINUE
The Canadian company's managers were opposed to this idea
Ford executive offices settled the matter: Ford-Canada would report to Ford
headquarters in Dearborn, and the company would remain outside the Ford
International hierarchy
Henry Ford II himself soon became a key player in efforts to integrate the
North American industry, a move that meant the final end of Ford-Canada's
operational independence.

THE ERA OF CONTINENTAL INTEGRATION:


FORD-CANADA AND THE AUTO-PACT REGIME,
1965-1975
The Canadian negotiators understood that unrestricted free trade could wipe
out Canadian production in an industry already over 90 percent owned by
American interests
Instead, the two governments and the industry came to a compromise: the
Canadians succeeded in having local content, investment, and output targets
that guaranteed certain levels of Canadian production in the American market
The auto pact provided a new departure for the company's North American
operations

CONTINUE
Henry Ford being an advocate of free trade, although had often held his
tongue on the issue of Canadian Ford company, which needed tariff
protection in order to avoid being overwhelmed by American imports
Trade treaty, reduced Canadian auto tariffs, prompted Campbell to implore
Edsel Ford to tell Washington that the Big Three auto companies were not in
favor of this measure, as it would impact their Canadian subsidiaries
Ford II's Canadian officials had kept him informed of the latest developments
on the negotiations between the industry and the Canadian government
The new arrangement allowed to import parts and autos duty free, as long as
they maintained a minimum 50 percent North American content

CONTINUE
Ford officials had explained that they foresaw difficulties meeting the
Canadian value-added requirement, due to rationalizing engine production so
Canadian-made vehicles would no longer contain Canadian-built engine parts
The president of Ford-Canada, now reported to the head of the sales group
for North American operations, while the director of the Canadian Overseas
Group was responsible to the parent company's executive vice president in
charge of overseas operations.
Formerly an independent company with its own hierarchy and structure, Ford
of Canada had become a mere division within Ford's North American
operations.

FORD OF CANADA IN THE NORTH AMERICAN


AUTO INDUSTRY,
1975-2004
North American industry faced dramatic challenges as the Big Three responded to
the oil embargo and energy crisis, the flood of Japanese imports, the restructuring of
the industry in the late 1970's and early 1980's, the arrival of foreign transplants in
both the United States and Canada, and the creation of the 1989 Canada-United
States Free Trade and 1993 North American Free Trade agreements
In response the Big Three shifted a greater percentage of their North American
assembly operations to Canada in an effort to take advantage of lower costs and
good productivity and quality results at its Canadian facilities
In 1965, Canadian production was 7 percent of the continental marketplace, yet by
the 1990s, Canadian production consistently outpaced that of North America by 15
percent.

CONTINUE
For Ford, this meant that, by the 1980s and 1990s, its Canadian plants were
the sole production source for its Windstar/Freestar minivan and its
important Crown Victoria and Grand Marquis midsized cars, which form a
significant element of fleet sales and are used throughout North America as
police vehicles and taxi cabs
Ford had reorganized its North American concerns into the North American
Automotive Operations (NAAO), consolidating the United States, Canada, and
Mexico in 1972
By 1984 the parent company, had gobbled up all but 11 percent of its
Canadian subsidiary

CONTINUE

In April 1995, Ford announced that as part of this global "Ford 2000" strategy,
the company would buy out the remaining 1,250 Ford-Canada shareholders at
$150 per share and take the company private

The plan was to cost the company C$76.6 million and end Ford-Canada's eight
decades as a publicly traded company

SWOT ANALYSIS
Strengths

Weaknesses

Strong and globally positioned brand


names

A lot of time spent to actually put the


product on the market

Large employee base with highly educated


engineers and good R&D department

Recording continuous losses (net income)


from 2006

One of the largest automotive


manufacturer (along with a long history)

Low quality of new products (recalls


causing losing customers)

1285% increase in net cash

Lack of management of the company

Huge increase in total equity

EPS very bad in negative numbers


(unattractive for the investors)

SWOT ANALYSIS CONTINUE


Opportunities
Consumers demand hybrid and fuel
efficient vehicles
Increase in consumer spending trends
Consumers demand more innovative
vehicles
Global expansion
Industry experiences slow and steady
growth

Threats
Weak USD
Increase in steel and resin pricing
Increasing gasoline prices
Stricter CO2 emission standards
Increasing mortgage rates

NEW OBJECTIVES
Reduce manufacturing expenses by 15-20%
Introduce new small fuel efficient vehicles
Enter Latin American and Asian market with hybrid vehicles
Develop affordable electric car for US market
Increase market share
Build up strong financials (increase net income and EPS by 15%)

RECOMMENDATIONS

Manufacturing of new small fuel-efficient vehicle

Entering the Latin American and Asian market with hybrids


Implementation of electric car in the US market
Manufacturing units in Asia and China zone for lower cost

THANKS!