External Factors Affecting Ford Motor Company

Topics: Ford Motor Company, Automotive industry, Station wagon Pages: 6 (1701 words) Published: June 28, 2008
Introduction
The purpose of this report is to examine the external factors affecting Ford Motor Company within the last four years. Dr. John L. Waltman has authorized this report. It is based on secondary sources, mainly gathered through the First Search Periodical Index. Authorized Publication includes Wall Street Journal, Financial Times, New York Times, and sources from the Internet. This report examines and analyzes these three external factors: vConsumer Demand

vIncreased Fuel Costs
vVisteon's Spin Off

Consumer Demand
Ford Motor Company's profits had been low in 1996. The company's consumers were demanding increased quality and option at low prices. Ford was forced to cut costs. Ford also planned to reduce their product development time. The consumers demand for higher quality and more options had a major impact on Ford.

Consumer Demand Brings Low Profits
In 1996 consumers were demanding better vehicles for lower prices and Ford Motor Company's Profits were low. Fords was not meeting these consumer demands. A Rubber and Plastic News article stated that this puts the company under a lot of pressure to cut costs (9,24). Ford Motor Company's vehicles were not in demand and sales were low. Ford Motor Company's profits were affected by this consumer demand.

Suppliers were a part of the plan
Ford Motor Company's customers were demanding a better product for a cheaper price. A Rubber and Plastics News article stated that Ford's suppliers play a major role in the plan to cut costs (9,24). Ford was forced to cut cost to be able to bring back the profit. Ford Motor Company and its suppliers were working together to cut costs. Not only did this consumer demand affect Ford, it also affected Ford's suppliers.

Decreased Development Time
The need to cut cost had affected the company in many ways. Ford's need to cut cost impacted their decision-making. A Rubber and Plastics News article stated the company was going to reduce cost by cutting vehicle development time (9,25). This was another impact that consumer demand had on Ford Motor Company.

Increased Fuel Costs
Ford Motor Company is the second largest automotive manufacturer in the world (3). Half of the Companies income is from selling high margin vehicles that are not very fuel efficient (13,47). Prices for fuel are increasing and have caused consumers to demand more fuel efficient vehicles. A recent Indonesian Commercial Newsletter states that fuel prices are decided politically and not by market demand (10,7). Concerns about global warming have also affected the automotive industry. This has caused Ford to change its construction of its Sport Utility Vehicles (SUV) and to use more magnesium parts.

Federal Fuel Standards
In 1997 there was a global warming conference to be held. Many of the issues to be discussed were the automotive industry and low fuel costs. It was the concern of many nations to raise the standards of emission levels. This article also states that President Clinton propose to reach the 1990 emission levels between 2008-2012. The Germans proposed to cut CO2 emission below the 1990 level. While the British proposed to reduce the CO2 emission by 20% (13,49). It was also the concern at the conference to raise fuel prices. Fuel prices affect consumer behavior and if the prices are too low then that will increase consumers driving time. In an Automotive Industries article chairman of GM Jack Smith states "Gasoline Prices are too low. That drives the behavior of buyers" (13,49). If fuel prices increase and federal fuel standards change that will affect all of the automotive industry. The regulations have imposed fines on automotive manufactures, such as Ford Motor Company. If the manufacture breaks the law, then they pay fines. In an Automotive News article reporter Harry Stoffer states that Ford Motor Company is adding on two manufactures that routinely pay fines for breaking federal fuel...

Bibliography: 1. Burt, Tim, "Visteon Tries to Achieve Independence from Ford," Financial
Times London Edison Financial Times, April 17, 2000, p.28.
2. Editorial Staff, "Ford Offers Investors a Bonus," Investor Relation Business,
May 1, 2000, v5, n9, p.9.
4. "Ford is Conceding S.U.V Drawbacks," New York Times, May 12, 2000,
vCXLIX, n51, p.A1.
5. "Ford to Give Holders Stock, Visteon Unit," Wall Street Journal, April 17, 2000,
n76, p.A3.
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Automotive News Europe, February 28, 2000, v5, n5, p.26.
9. Miller, Joe, "Automakers get Ready for 21st Century," Rubber and Plastic News,
September 9, 1996, vXXVI, n3, p.24-28.
10. "Procurement of Fuels Remains Dilemmatic Imports Except to Increase,"
Indonesian Commercial Newsletter, April 11, 2000, vXXVII, n289, p.7-8.
11. Sherefkin, Robert, "Visteon, Set Free, Seeks Running Start," Automotive News,
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13. "Straight From the Top," Automotive Industries, November, 1997, v177, n11,
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