Can Ford Manage a 50 Percent Rise in Sales?

Mulally shares marketing strategy with financial analysts in New York.

NEW YORK – The Ford Motor Company is in an excellent position to grow, with new products in place and many more on the way. Managers for the automaker believe that the company can handle rapid growth and has forecast that its global sales will rise by about 50 percent in four years, with Ford selling at least 8 million cars annually come 2015.

This made for India Figo won that country's COTY award in 2011.

Aggressive Global Growth

That’s aggressive growth in any industry, much more so when it comes to selling cars. If you look at the global picture through a North American lense, you see a competitive market, consumers hesitant to buy and sales still far off the pace we saw just five years earlier. But, when you view the entire world, a number of hot opportunities exist, countries like China, India, Africa and other emerging markets where millions of consumers are buying new cars for the first time.

Alan Mullaly

Ford announced its strategy as company President and CEO Alan Mulally met with financial analysts in New York on Tuesday. [1] Mulally noted that Ford is positioned to enjoy rapid growth as its “One Ford” initiative of developing models for the global market strengthens.

Ford sees sales in mature markets such as the United States and Europe recovering, with most of its growth taking place in Africa and the AsiaPacific rim. The automaker’s expanded ability to build small and fuel efficient cars is working in its favor, and should fuel its sales. Ford also sees its operating margins rising from 6.1 to 8 or 9 percent and its debt reduced by more than 50 percent. The company also expects that it will return to “investment grade” in the near future and resume paying dividends to its shareholders.

Industry Leading Quality

Managing rapid growth can present a huge challenge for any company. In the auto industry, capacity must be in place, something Ford expects to meet by fully utilizing its existing plants and through expansion. One area of huge concern is quality, an area Ford has struggled with in the past, but has since gotten under control. Indeed, in 2008 Consumer Reports as reported by Robert Schoenberger of “The Plain Dealer.” said that Ford’s quality was on par with Toyota and Honda. [2]

Notably, to serve emerging markets, the automaker plans to build lower-priced versions of its global vehicles, reducing prices by $1,000 to $2,000 depending on the model and its size. Mulally used the term “localization” to explain how Ford will reduce costs, building some of these vehicles nearby and winning new customers to the brand. Mulally was quick to emphasize that these vehicles will offer “the top standards for quality, fuel efficiency, safety, smart design and value that customers expect.” That’s important because negative quality perceptions can sink the best laid plans of managers and minions.

Auto Industry: 2015

Mulally’s remarks and Ford’s outlook is based on an industry that is expected to expand from selling 74 million cars globally in 2010 to 95 to 100 million units in 2015. China alone may account for about one-third of that number as the world’s largest car buying market continues its rapid growth. India, now with more people than China, has also proven to be a strengthening market, with Ford selling its made for the market subcompact Figo and winner of the 2011 India Car of the Year award. [4]

References

[1] Ford Motor Company; Ford Mid-Decade Outlook Calls for Global Sales Growth, Stronger Margins, Expansion in Asia; June 7, 2011

[2] Cleveland.com; Ford’s Reliability on Par With Honda and Toyota, Consumer Reports Says; Robert Schoenberger; October 23, 2008

[3] The Globe and Mail; China’s Auto Market the World’s Biggest – and Growing Fast; Jeremy Cato; May 19, 2011

[4] Ford India: The Ford Figo is the Indian Car of the Year 2011!

Photos: Ford Motor Company

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