The Ford Motor Corporation

In the year 1919, the Ford Motor Company merged in Delaware. Ford was founded to build and sell automobiles designed and manufactured by Henry Ford. Ford is also global mobility and automotive company headquartered in Dearborn, Michigan. The corporation boasts of having nearly 199,000 workers spread across 67 plants worldwide. Ford is the world’s second-largest automobile manufacturer. The main business of the company is to develop, engineer, finance, sell, and restore a fleet of Ford vehicles, Lincoln luxury cars, SUVs, and electrified vehicles. Ford is adamant in its pursuit to be global leader in mobility, connectivity, and customer satisfaction, automation of vehicles, and information and analytics via Ford Smart Mobility.
Overview
Ford Motor Businessassesses and presents its business outcomes in two divisions: Financial and Automotive Services. In these divisions, the industry is separated into documentable segments (regions, business Unit or segments) on the basis of the administrative structure that is used to assesspresentation and make verdictson resource distribution, and also the obtainability and materiality of distinct financial outcome constant in the structure.

Reportable business unit in Ford’s Automotive and Financial Services sector at 03/12/2015 are detailed by the tabulation below:

Business Sector

Reportable Segments

Description

Automotive:

North America

Primarily includes the sale of Ford and Lincoln vehicles, service parts, and accessories in North America (the United States, Canada, and Mexico), together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories.

 

South America

Primarily includes the sale of Ford vehicles, service parts, and accessories in South America, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories.

 

Europe

Primarily includes the sale of Ford vehicles, components, service parts, and accessories in Europe, Turkey, and Russia, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories.

 

Middle East & Africa

Primarily includes the sale of Ford and Lincoln vehicles, service parts, and accessories in the Middle East and Africa, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories.

 

Asia Pacific

Primarily includes the sale of Ford and Lincoln vehicles, service parts, and accessories in the Asia Pacific region, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories.

 

 

 

Financial Services:

Ford Credit

Primarily includes vehicle-related financing and leasing activities.

Automotive Sector

General

The company’s automobile brands are Lincoln and Ford. In the 2015 alone, Ford Motor Co. sold over 6,635,000 automotive worldwide. Considerably all of the automobiles, accessories and spare parts are sold via dealer and distributors. By December 2015, the Ford Motor Co. had an estimated 11,971 dealers and distributors worldwide with the Ford brand having 10,727, Lincoln brand having 360 and combined brand (both Lincoln and Ford) 884. Ford does not depend on a single customer rather it has adopted partnership with multiple dealers in order to ensure the company has continuous demand for their vehicles.

Like other automobile manufactures, the success of Ford is impacted by various factors, they include:

Wholesale unit volumes.

Profit margin on each vehicle- this is impacted by a lot of factors, including

Marketing aspects- mix and volume of automobile and net pricing and options sold.

Price of raw material and components needed for production of vehicles.

Price of customerguaranteeentitlements and additional service action.

Price for emission, fuel economy and safety equipment and technology.

High amount of relative constant structural cost such that slight alters in wholesale units’ volumes mightconsiderably impact the generalproductivity.

Competitive position: the global automotive industry is made up of numerous players. The industry however does not have a single main player. However, there specific manufactures that make up the largest percentage of overall revenue in specific nations, particularly in their nations of foundation. Some of the main competitors with global presence are General MOTOR Co., Fiat Chrysler Automobile, Honda Motor Co., Toyota Motor Co., Hyundai-Kia Automotive Group, Volkswagen AG Group, Suzuki Motor Corp., Peugeot Citroen and Renault-Nissan.

Seasonality: Ford Motor Co. usually records sales of vehicles when they have been manufactured and shipped to distributors and dealers. The company regards this as revenue.

Raw Materials: Ford buys a wide range of materials from suppliers globally for use in production of vehicles. The company has partnership with numerous suppliers who are able to meet their needs.

Backlog Orders: Ford usually manufactures and ships product on average in 20 days and the order is thought to develop firm. Thus Ford doesn’t experience substantialvolume of backlog orders at any time.

Intellectual assets: Ford has been able to secure numerous trademarks, patents, and copyrights on a worldwide basis. The company’s strategy is to secure its competitive spot by among other techniques applying for patents globally in order to secure technology and advancements that are key to the growth of the company (Behmer, Bernardo, &Depeyster, 2016). On a global scale, Ford Motor Co. has over 38,500 active and pending patents globally. To complement intellectual assets, Ford depend on on brandedawareness and continuing technological innovations to create and maintain its competitive position. The company also has many service and trademarks marks that have contributed to the uniqueness and recognition of the Ford brand. Some of these trademarks are vital to the operation of business, loss of which we could have severe impact on our business.

Warrant Coverage, Customer Satisfaction Action and Field Service Action. The Ford Co. offersguarantees on the automobiles it sells. Guarantees are accessible for particular period of time or millage. Warranties tend torely on the category of product and the geographical position of its sale. Those who claim these guarantees will receive the necessary services during the statedguarantee duration. In addition to cost connected with the contract coverage provides on automobiles, Ford incurs cost as a consequence of field service activities, and for consumergratificationactivities.

The table below documents industry capacity market shares and extensive units in everyregion in particularsignificant markets inall regions.

Industry Volume (a)

 

Market Share (b)

 

Wholesales (c)

 

(in millions of units)

 

(as a percentage)

 

(in thousands of units)

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

 

2015

 

2014

 

2013

United States

17.8

 

16.8

 

15.9

 

14.7

%

 

14.7

%

 

15.7

%

 

2,677

 

2,457

 

2,608

Canada

1.9

 

1.9

 

1.8

 

14.4

 

15.5

 

15.9

 

285

 

288

 

283

Mexico

1.4

 

1.2

 

1.1

 

6.7

 

6.9

 

8.0

 

93

 

77

 

91

North America

21.5

 

20.2

 

19.1

 

14.0

 

14.2

 

15.2

 

3,073

 

2,842

 

3,006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

2.6

 

3.5

 

3.8

 

10.4

%

 

9.4

%

 

9.4

%

 

250

 

320

 

364

Argentina

0.6

 

0.7

 

0.9

 

14.8

 

14.1

 

12.6

 

94

 

94

 

118

South America

4.2

 

5.3

 

5.9

 

9.6

 

8.9

 

8.9

 

381

 

463

 

538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Britain

3.1

 

2.8

 

2.6

 

14.3

%

 

14.4

%

 

14.6

%

 

447

 

425

 

379

Germany

3.5

 

3.4

 

3.3

 

7.3

 

7.1

 

6.9

 

261

 

237

 

227

Russia

1.6

 

2.5

 

2.8

 

2.4

 

2.6

 

3.8

 

38

 

57

 

105

Turkey

1.0

 

0.8

 

0.9

 

12.6

 

11.7

 

12.9

 

128

 

91

 

114

Europe (d)

19.2

 

18.6

 

18.3

 

7.7

 

7.2

 

7.3

 

1,530

 

1,387

 

1,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Middle East & Africa

4.3

 

4.3

 

3.9

 

4.5

%

 

4.6

%

 

5.0

%

 

187

 

192

 

199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China (e)

25.1

 

24.0

 

22.2

 

4.5

%

 

4.5

%

 

4.1

%

 

1,160

 

1,116

 

936

Australia

1.2

 

1.1

 

1.1

 

6.1

 

7.2

 

7.7

 

71

 

80

 

85

India

3.4

 

3.2

 

3.3

 

2.1

 

2.4

 

2.5

 

78

 

77

 

80

ASEAN (f)

3.0

 

3.2

 

3.5

 

3.3

 

3.1

 

2.7

 

94

 

94

 

99

Asia Pacific (g)

40.5

 

39.7

 

37.8

 

3.5

 

3.5

 

3.3

 

1,464

 

1,439

 

1,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

89.5

 

88.1

 

85.0

 

7.3

%

 

7.1

%

 

7.3

%

 

N/A

 

N/A

 

N/A

Total Company

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

6,635

 

6,323

 

6,330

______________

Financial Service Sector

Ford Moto Credit Company LLC

Ford is able to wholly finance its operation via automotive dealer throughout the globe. The majority portion of Ford Credit’s trade comprises of sponsoring their automobiles and subsidiaryfor their suppliers. Ford is able to generate returns through expenditures made inwholesale installments sales and lease agreements that it originated and buys; interest rate supplement and extrasustenanceexpenses from Ford and their affiliates; such expenditures are made under suppliersponsoringplans.

As a consequenceof suchactions, Ford has been able to establish a large portfolio of finances and they can be categorized into two major portfolios; consumer and non-consumer. Authors Behmer, Bernardo, &Depeyster, (2016) defines consumer discretionary as a term from economics that the sector of the economy that produces goods and services that are non-essential i.e. luxury businesses. Consumer discretionary tends to slump when the economy is doing poorly but does extremely well when the economy is surging. A lot of investors usually purchase a lot of consumer discretionary stocks when they assume that the economy is about to grow.Finance receivables and operating leases fall under consumer portfolio. Finance receivables and operating leases comprise of products that are given to persons and trades that fund the procurement of Ford automobiles from wholesalers and distributors for commercial and personal use.Wholesale financing comprises of retail payment sale agreements for used and new automobiles and straight financing leasing for new automotive to wholesale and fleet consumers. Investmentreceivables are in the non-consumer inventory including merchandises presented to vehicle suppliers. Ford Credit Company provides with floorplan financing. Floor plan financing according to Behmer, Bernardo, &Depeyster, (2016) is financing where Ford makes general loans to dealers to finance the procurement of automobile portfolio. The Ford Credit Company also grants loans to dealers to fund the procurement of franchise real estate or finance operating capital and developments to franchiseamenities. Ford Motor Co. generates revenue through their subsidiaries and the revenue is used to obtain receivables for the Ford Credit Company.Correlated to the transaction of automobile accessories and spare part to suppliers, receivables from the credits tied to Ford and specific used automobiles from everydayhire fleet enterprises.

In Canada and the United States, Ford Credit does business via business centers. Without the United States of America, Europe forms Ford Credit’s mainset-up. All operations in Europe are accomplished via the United Kingdom-groundedsupplementary, FCE bank. In Europe the largest markets for FCE are the United Kingdom and Germany, signifying nearly 67% of FCE investment receivable and operationalagreements.

The tabulation below documents Ford Credit Sponsoringstocks of original Lincoln and Ford sold within the United States of America and original Ford automobiles sold within Europe and also its dealer financingstocks on new Lincoln and Ford attained by suppliers within the United States of America and innovative Ford Automotive in the Europe.

Years Ended December 31,

 

2015

 

2014

 

2013

United States - Financing Share

 

 

 

 

 

Retail installment and lease

47

%

 

45

%

 

40

%

Wholesale

76

 

77

 

77

 

 

 

 

 

 

Europe - Financing Share

 

 

 

 

 

Retail installment and lease

37

%

 

36

%

 

34

%

Wholesale

Ford Motor Co. regularly finance unique lease and retail incentives to dealers’ consumers who opt to lease or sponsor automobiles from Ford Credit Company. Toreimburse Ford Credit for the low agreement and interests it offers to retail consumers, Ford Motor Co. finances the cost of incentive to Ford Credit while it initiates from lease contract or retail finance. Such plans up surge Ford’s Credit shares and financing volumes.

The new financial agreement made between Ford Motor Co. and Ford Credit where Ford Credit required Ford Motor Co. to make capital contribution using projection of 11.5:1 as leverage. The amount that sufficient to lead to increase in credit by the projected margins.

Market for Mutual Equity, Connected Stockholder Stocks and Issuer Acquisitions of Equity

Ford Motor Co.has common Stocks on stock exchange in France and Belgium. The Business’s largest mutual stocks are on the NYE, New York Stock Exchange. The tabular representation of Ford’ Stock will detail the low and high prices for mutual stocks and the disbursements Ford Motor Co. has rewarded per stake of Class B and Mutual stock for the period between 2014 and 2015.

2015

 

2014

 

Ford Common Stock price per share (a)

First

Quarter

 

Second

Quarter

 

Third

Quarter

 

Fourth

Quarter

 

First

Quarter

 

Second

Quarter

 

Third

Quarter

 

Fourth

Quarter

High

$

16.74

 

$

16.16

 

$

15.30

 

$

15.84

 

$

16.78

 

$

17.35

 

$

18.12

 

$

16.13

Low

14.30

 

14.78

 

10.44

 

13.40

 

14.40

 

15.43

 

14.49

 

13.26

Dividends per share of Ford Common and Class B Stock

0.15

 

0.15

 

0.15

 

0.15

 

0.125

 

0.125

 

0.125

 

0.12

According to Form 10-K. (2016)as from 04/02/2016, shareholders of records of Ford Motor Co. consisted of about 137,858 stockholders of Shared Stocks ad thirty four stockholders of Class Bstocks. In March, Ford initiated a moderate anti-dilutive bond repurchase suite that was set to balance the dilutive impact of stock-based reimbursement issued in 2015. The strategysanctioned the reacquisition of around $8.5 million bonds of mutual bond. Thesuite was closed in July the same year.

December 2015, Ford adopted a change in accountability strategy for particular constituents of expense associated with Ford’s defined OPEB and benefit pension plans (Form 10-K, 2016). Ford applied changes in accounting techniques with hindsight to phases concealed in the Report. The fluctuation in the amount are reflected by the table below. The table presents Ford’s financial data for the last five years.

SUMMARY OF INCOME

2015

 

2014

 

2013

 

2012

 

2011

Total Company

 

 

 

 

 

 

 

 

 

Revenues

$

149,558

 

$

144,077

 

$

146,917

 

$

133,559

 

$

135,605

 

 

 

 

 

 

 

 

 

 

Income before income taxes

$

10,252

 

$

1,234

 

$

14,371

 

$

2,005

 

$

3,687

Provision for/(Benefit from) income taxes

2,881

 

4

 

2,425

 

89

 

(13,207

)

Net income

7,371

 

1,230

 

11,946

 

1,916

 

16,894

Less: Income/(Loss) attributable to noncontrolling interests

(2

)

 

(1

)

 

(7

)

 

(1

)

 

9

Net income attributable to Ford Motor Company

$

7,373

 

$

1,231

 

$

11,953

 

$

1,917

 

$

16,885

 

 

 

 

 

 

 

 

 

 

Automotive Sector

 

 

 

 

 

 

 

 

 

Revenues

$

140,566

 

$

135,782

 

$

139,369

 

$

126,567

 

$

128,168

Income/(Loss) before income taxes

8,224

 

(560

)

 

12,699

 

295

 

1,256

 

 

 

 

 

 

 

 

 

 

Financial Services Sector

 

 

 

 

 

 

 

 

 

Revenues

$

8,992

 

$

8,295

 

$

7,548

 

$

6,992

 

$

7,437

Income before income taxes

2,028

 

1,794

 

1,672

 

1,710

 

2,431

 

 

 

 

 

 

 

 

 

 

Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock

Average number of shares of Ford Common and Class B Stock outstanding (in millions)

3,969

 

3,912

 

3,935

 

3,815

 

3,793

 

 

 

 

 

 

 

 

 

 

Basic income

$

1.86

 

$

0.31

 

$

3.04

 

$

0.50

 

$

4.45

Diluted income

1.84

 

0.31

 

2.94

 

0.49

 

4.13

 

 

 

 

 

 

 

 

 

 

Cash dividends declared

0.60

 

0.50

 

0.40

 

0.15

 

0.05

 

 

 

 

 

 

 

 

 

 

Common Stock price range (NYSE Composite Intraday)

 

 

 

 

 

 

 

 

 

High

16.74

 

18.12

 

18.02

 

13.08

 

18.97

Low

10.44

 

13.26

 

12.10

 

8.82

 

9.05

 

 

 

 

 

 

 

 

 

 

SECTOR BALANCE SHEET DATA AT YEAR-END

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Automotive sector

$

91,959

 

$

90,167

 

$

90,504

 

$

86,852

 

$

79,014

Financial Services sector

137,026

 

121,388

 

115,057

 

105,012

 

100,612

Intersector elimination

(1,083

)

 

(1,024

)

 

(1,631

)

 

(252

)

 

(1,112

)

Total assets

$

227,902

 

$

210,531

 

$

203,930

 

$

191,612

 

$

178,514

 

 

 

 

 

 

 

 

 

 

Debt

 

 

 

 

 

 

 

 

 

Automotive sector

$

12,839

 

$

13,824

 

$

15,683

 

$

14,256

 

$

13,094

Financial Services sector

120,015

 

105,347

 

99,005

 

90,802

 

86,595

Intersector elimination (a)

—

 

—

 

—

 

—

 

(201

)

Total debt

$

132,854

 

$

119,171

 

$

114,688

 

$

105,058

 

$

99,488

 

 

 

 

 

 

 

 

 

 

Total Equity

$

28,657

 

$

24,465

 

$

26,173

 

$

15,924

 

$

14,917

Overview

Revenue

With respect to Ford’s automotive sector, revenue and Margins are mainly generated by sale of accessories, spare parts and automobiles. According to Behmer, Bernardo, &Depeyster, (2016), Ford treats transactions and advertisinginducements as decrease to income. Ford’s proceeds are documented once all rewards and risks of proprietorship are moved to their major consumers i.e. distributors and retailers. For most of the generated revenue, this is achieved when shipments are shipped from Ford’s manufacturing industries. However, this is not the same for automobiles that are produced for sales to vehicle rental services that are subjected to sure repurchase choice. Such cars are documented as operating contracts, with agreement margins and revenue documented over the specified duration of the contract (Washington Form 10-K., 2016). Revenue from the sales of these cars at a sale are documented in proceeds at the time of auction.

A lot of the automobiles shipped to distributors and retailers are funded by wholesalers at Ford Credit. Once Ford Credit Co. provides wholesalers receivables corresponding to consumer’s acquisition of the automobiles. Ford Credit this then obligated to finance the significant legal body in Ford’s vehicle division in compensation of the supplier’s compliance to the set acquisition price of the automotive. Distributors and retailers then incur the cost of wholesale investment receivable to Ford Credit Co. on selling the cars to retail consumers.

Revenue from Ford’s Financial Service Division area generated mainly from credit transactions on finance receivables, net of particular postponed start cost that are comprised as a reduction of financial revenue. Income from workingcontracts is documented on a direct-line manner over the specified period of the agreement. Revenue is created to adegree that they surpass expenditures, most of which are credit transaction operation and depreciation expenditures.

Operations amid Financial and Motorized Service sector arise in the normal course of commercial. For instance, Ford offers dealers’ customers looking to lease or finance vehicles from Ford Credit special retail lease and financing incentives. The total price for these inducements is documented as income mitigation to Vehicle sale at the future date the associated cars sales to our dealers are documented. To reimburse Ford Credit Co. for the mitigated lease or interest rate delivered to the wholesale consumer, Ford incurs reducedcost of the inducementright to Ford Credit as soon as it initiate the lease or finance agreementby means of the retailer’s consumer (Washington Form 10-K., 2016). Ford Credit documents this over the existence of the retail financial agreement as an aspect of the Financial Statement for a supplementarycomprehensive discussion of payments and transactions amid the Financial and Motorized Service sector.

Cost and Expense

Income statement categorizes Ford’s automotive total cost into two groups: price of sales and administrative, marketing among other expenditures. These expenses are inclusive of the cost of manufacture, development, and distribution of vehicle accessories and parts. The company specifically includes in cost of sale the following freight cost, material cost, product recall, warranty and consumer consummationprogram cost. Other costs that fall under costs of sale are labor cost, amortization and depreciation cost. In selling automobiles, administrative, expense cost and cost not directly linked to development and manufacture of vehicles (Washington Form 10-K., 2016).

There are some costs that tend to vary in changes in mix and volume of production. Such cost include material cost. In the vehicle manufacturing industry, production varies greatly from time to time. Quarterly manufacturevolume undergo seasonal shifts and this significantly affects the cost of production.The variability in material cost is dependent on the global economy. When the economy slumps, materials are expensive and this in turn affects the productivity of the company. When the economy is booming the converse is true.

Analyzing, the margin impacts of particular price variability holding continuous current-year volume, currency exchange and mix to assess Ford’s cost trends withoutchangingmanufacture and money exchange levels. Ford Motor Co. analyze this through the subsequentclassifications:

Contribution Cost: such chargesnormally vary through production volumes. Such charges include, commodity, material, freight, duty and guarantee cost.

Structural Cost: these charges do not take any direct proportionalassociation to manufacture volume. Such chargescomprise engineering, industrial, advertising, sale and spending –oriented promotions.

Contribution cost usually fluctuateopenly in quantity volume, element in Ford’s structural cost group are affected to different extent by the variations inmanufacture volume. Ford has adopted various extents of discretion to when it comes to regulating the various element in structural cost. For instance, amortization and depreciation expense are significantly attributed to previous capital spending decisions. However, since labor cost don’t vary depending on population volume, production labor cost may be affected by fluctuation in volume. Another structural expenses like engineering and advertising do not have a direct association with the production volume. According to Washington. Form 10-K. (2016). Structural cost at Ford Motor Co. are usually in their discretion even though varying degrees can be adjusted to respond to external factors.

When considering particular structural costs that will be used as direct investments in forthcoming progression and proceeds. For instance, the rise in organizational cost are required to develop Ford’s business and enhance profitability as the company expands into new areas globally, invest in latest technologies and products, respond to up surge industry margins .

The total expenditure for the year 2015 was approximately 134.5 billion. From this, nearly two thirds of was from commodity and material cost. The remaining balance is largely consumed by structural cost. Even though the largest part of this expenditure is material cost, profits can be impacted by variation in any classification.

Ref