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COMPARATIVE ANALYSIS: FORD MOTOR COMPANY TOYOTA MOTOR CORP. dr Agata Kocia based on presentation by: PAWEŁ ORZECHOWSKI, MACIEJ OŚWIT & ANDRZEJ BENCZEK. FORD: the beginning. Henry Ford designed his first moving assembly line in 1913
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COMPARATIVE ANALYSIS: FORD MOTOR COMPANY TOYOTA MOTOR CORP dr Agata Kocia based on presentation by: PAWEŁ ORZECHOWSKI, MACIEJ OŚWIT & ANDRZEJ BENCZEK
FORD: the beginning • Henry Ford designed his first moving assembly line in 1913 • “Wheels for the world”-the motto behind popularization of cars • Each section of the production process was divided into component parts • Combination of precision, continuity, and fast-paced brought the world – mass production • In Highland Park, Model T production reached record levels, every day a car came of the assembly line every ten seconds
TOYOTA: the beginning • Toyota's history began at the end of XIX century • Sakichi Toyoda invented Japan's first power loom which revolutionized the country’s textile industry • Two years later, he founded the company Toyoda Automatic Loom Works • Toyody Sakichi’s son, Kiichiro Toyoda invested 100,000 pounds in the creation of Toyota Motor Corporation in 1937 (TMC) • Sakichi Toyoda received this money for selling the patent rights to an automatic loom
FORD • The fourth-largest automotive company in the world in terms of sales • Sells cars on 6 continents • Car Brands: Ford, Mercury, Lincoln and Volvo • in March of 2010 confirmation of sale of Geely Automobile Holdings Ltd) • Since the mid-90’s Ford continually loses significance in the American market • Over the same period steadily increases its share in the European market • Reasons for the gap between the development of the brand in the U.S. and Europe: • high labor costs in the U.S. • high expenditure on healthcare in the U.S. • strong trade unions in the U.S. (high pension commitments) • strong economic growth in lower combustion cars
TOYOTA • The biggest carmaker in the world in 2009 (more than 7.5 million cars) • Main markets are Japan and North America, but recently we can see a strong growth in Asian and South America markets • Toyota has three brands: Toyota, Lexus and Scion
FORD: more economic • Dominance of large cars: SUVs, Pick ups • Rapid fluctuations in oil prices and legislators striving to reduce consumption of materials led to reorganization • Restructuring of the three production lines for production of more economic models in Europe (Mondeo, Focus etc.) • in short-run minimization of costs • Ultimately, Ford intends to make engines in all their models to be more economical • In 2009 to market were introduced four hybrid models based on technology leased from Toyota
FORD: hybrid technology • Currently, Ford has four hybrid models • Ford Focus Hybrid is a direct threat to so far the most popular Prius (hybrid line of Toyota) • In 2010, the company plans to spend an additional $450 million to develop electric motors • By 2012, Ford wants to produce own hybrid technology and plug-ins • Ford has invested more than $550 million in restructuring its manufacturing facility in Michigan • What if the market chooses a different path?
TOYOTA: hybrid technology • Toyota as one of the first ones started a hybrid cars production line (including leasing its technology to Ford) • At present, hybrid Toyota - Prius line, represents approximately 73% of all hybrid vehicles sold in the U.S. • So far in the U.S. Toyota sold the 1,000,000+ hybrid cars • In addition, Toyota announced its intention to manufacture electric cars with lithium-ion batteries “Toyota Plug-HV”
FORD: ONE FORD • Despite the very large amount of cars produced, so far Ford has derives small economies of scale by applying a separate, independent technologies and models for European, US and developing markets • “One Ford” – changed approach • Ford moves the emphasis to universal models for use in different regions of the world (the first "world car"-new Ford Fiesta)
FORD: wrong sales model • From the 90s Ford has created demand • sales on installments without interest charged • discounts • promotions combined with a loan • Ford exceptionally strong suffered from a crisis on a real estate market • in recent years, sales in the U.S. were strongly associated with the property market • it is estimated that in California, 30% of car purchases has been financed with a mortgage • Feeling the effects of this approach, Ford began to change strategy • less emphasis on creating demand • emphasis on quality and safety
FORD: developing markets • Ford is mainly engaged in the American market,which slowly begins to lose its attractiveness • Ford’s task now is to develop a universal line for use in every country (European Ford Fiesta in the U.S., Ford Transit Van in Asia) • Whether european car models will be appealing to clients in India or Brazil depends the future of Ford in the long term.
TOTOTA: withdrawal of models • Several serious flaws in the models has significantly hurt Toyota’s image • in 2009, the company had to withdraw from the market 3.8 million vehicles due to the acceleration system flaw • In the short term: • it is estimated that due to defects and withdrawals Toyota models suffered losses of $ 3 billion in 2010 • over the past year, throughout the world over 9 million vehicles have been withdrawn • for consideration more than 30 lawsuits are waiting • In the long term: • current crisis has significantly hurt the reputation of the company • competition has used well (Chrystler, Ford and Honda hasorganized the promotions, giving discount on a new car for customers who got rid of the old Toyota)
TOYOTA: the future • Car Sales in highly developed countries will fall and remain at low levels • majority of consumers’ demand is already satisfied • relatively low economic growth • The biggest outlays directed on emerging marketsmainly Brazil, Russia, India, China (BRIC) countries • Toyota earlier than other companies in the sector began to invest in the development of appropriate infrastructure and brand awareness in the above countries • in 2009 Toyota announced the beginning of motor vehicle production in India (the company Toyota Kirloskar) • in 2010 Toyota plans to produce 100,000 cars in the new factory opened in India
TOYOTA: trends and expectations (1) • Japan • investing in luxury brands (Lexus) • in 1990 10% of Japan's population was over 65 years, in 2006, the number suppose to double • older society saves more and raises the demand for more luxury goods • USA • collapse of the real estate market • strength of real estate market has always been related to car market because consumers often fund the purchase of car with a mortgage owed • stagnation in credit market will reduce demand for new cars • demand for green technologies • oil prices are rising, resulting in increased demand for cars Hybrid (Prius model) • in December of 2007. U.S. government passed a law requiring the car manufacturers to reduce the combustion of up to 35 mpg for cars, trucks and SUVs – Toyota,typically produces small, economical cars and its standards are already satisfy new requirements
TOYOTA: trends and expectations (2) • USA • hybrid legislation • USA introduces new law to encourage development of hybridtechnologies • at present, when buying a car you can count on the hybridtax relief of up to $ 3,400, depending on the amount of car sales (the more cars the company sells the smaller the deduction ) – the aim is to support companies desiring to enter the market with hybrid technology • World Market • demand for cars will depend on the trend in oil, steel and aluminum prices
FORD • Ford is exposed to various kinds of risk not only to the market risk • currency risk, commodity price changes, interest rate risk,financing risk, risk of extraordinary events are just some of the most important kinds of risk present • risk of loss of liquidity: hedge against it by sale of receivables (securitization), issue of debt and bank loans • insurable risks: the loss (damage) of property, civil liability – companies insure themselves privately • they use derivatives to hedge – currency, interest rate or changein commodity prices risk – by forwards, swaps, options • does not use derivative to speculate
TOYOTA • Toyota is exposed to risks arising from: • changes in exchange rates • interest rates • availability of materials • changes in prices of materials • Instruments used to protect: • forward contracts • currency and interest rate options • swaps • Unfortunately, Toyota does not protect itself from price changes and changes in supply of materials • only protection is to maintain reserves of some materials
TOYOTA: currency risk • Toyota settles its invoices in Japanese yen which increases its currency risk • Changes in exchange rates reflect very strongly on company results • change in the dollar-yen exchange rate of 1% will change revenues by about $42 million • Toyota protect itself from risk with the help of swaps and futures • Despite this, the company is unable to protect itself from a falling demand for exports of Japanese cars due to a change in exchange rates
