Ford Motor Company: The Product Warranty Program

Leul Getahun

Ford Motor Company: The Product Warranty Program

BBUS 438

July 18, 2016

Company Background:

        Founded in 1903 by Henry Ford in Dearborn, Michigan, Ford Motor Company has grown to become one the world’s largest and most recognizable brand. By the year 1986 ford had become one of the world’s largest manufacturers, the second largest auto-maker, and Americas third largest industrial corporations. 1986 was a big year in Ford’s history. It was the first year that ford beat General Motors in profits. That year Ford also broke its internal records by reaching a record high in sales and net income, $62.7 billion and $3.3 billion respectively. Ford was seeing a huge change from its slump/losses of $3.5 billion in the 1980-82.

        The hard times faced by automakers in the time frame of 1980-82 were attributed to two major factors. The first being the 1970 oil shock and the second being the economic depression. These events had led to the industry as a whole to go through a brief depression in the early 80s. Another source of pressure for the US automobile industry to withstand was market share poaching foreign competitors.  

        However, in 1983 the industry made a comeback due to what analyst call a commitment to “increased efficiency, quality, and commitment.” The impressive 1986 numbers can be a result of many factors. For sure the year-end sale in 1986 rushed people to buy cars as the customers looked to take advantage of the sales-tax deduction that would not be available to them in the following year. This also meant that sales would not be as high in the year 1987. Analysts forecasted a 10.4 million unit, or 9% drop from the sales in 1986.

Competitors and The U.S. Car Market:

        Although Ford has many competitors in the U.S. market Ford’s management only considered their true completion to be General Motors, Chrysler, and, the new entrants to the market, the Japanese companies. General Motors sunk $41.5 billion in their reconstruction the years between 79-85. Their goal was to pay it off in the future. But as their shares of the market shrunk, by about 4%, the started running their new high-tech plants under capacity, and that caused them to lose profitability.

        Americans considered cars to be a necessity. There was at least one vehicle per adult person. In the 88.5 million households, at least 53% owned two or more cars, and 33% owned alone car. More than 70% of commuters, and 80% of city to city were commuting by car. From Fords Market research we can see that people are keeping their cars longer than they used to, they are also choosing their dealerships and cars after a lot more searching than in the past. An important thing to remember is that the ownership cycle had increased by about 2 years, attributed to the availability the “extended length financing” and the quality of the cars.