Market Conditions That Face Ford
In early 2006, Ford Motor Company announced a significant round of cost-cutting that will result in the loss of more than 20,000 jobs and reshape the company in a significant way. This in itself would be a significant news item, but the American automaker went through a similar cost cutting program in 2003 that obviously failed to resuscitate the company. Ford’s history is one of spectacular failures and equally spectacular recoveries·this is the company that introduced both the Edsel and the Mustang, but now faces challenges that will test whether it is able to survive in today’s highly competitive automotive market. This research considers the market conditions that Ford is likely to face in terms of price, productivity and cost.
So long as Ford’s products are considered commodities that compete almost entirely on price, the company will face strong competition and downward pressure on its prices. Some car models, such as the Chrysler PT Cruiser when it was first introduced, are able to command premiums over their price; such is not the case for Ford products today. Ford does not compete in the high-end luxury car market under the Ford brand (the Jaguar line competes here, however), so profit margins are less for the company at the lower end of the price spectrum. This is likely to continue in the near future until the company is able to differentiate its products so that they can command a higher price (Walsh, 2006).
Productivity is a key issue for Ford and other American manufacturers as they work with highly structured and once-powerful unions. Plant closings might make unions more amenable to concessions, but some analysts feel that workers have already given concessions to the breaking point. Productivity gains can be realized through increased automation, but this also requires capital investment which could be difficult for the company to obtain, and could displace workers in th