Ford’s Strategic Choices

I recently took delivery of a new Ford SUV.  Apparently I am not alone.  Ford has registered solid market share gains in 2009 driven by new competitive products and pricing plus attracting the “Loyal Domestic” segment from GM (Government Motors) and Chrysler. Many of these customers share a newfound respect for Ford, given that did not take any government bail-out money or seek bankruptcy protection. 

So things are looking up for Ford, or are they?  In the short term, Ford is caught between an automotive rock and a capital hard place.    One threat is their newly streamlined Big 2 rivals, recently retooled from a $62B bailout and bankruptcy protection.  On the other side are the more financially secure (yet also challenged) Japanese, South Korean and German competitors who continue to deliver excellent products and are now are also expanding their distribution and marketing footprints. Worryingly, the German and French governments have identified Fords’ main competitors as “national champions” worthy of strategic support.  Finally, the entry of some new  players like Tata (India) and Cherry (China) with new, low cost models could pose significant market share and margin risks to Ford’s core North American market.  Overlying all of this is an estimated 10-15% in excess capacity globally and the continued recessionary impact on consumer spending.

There are a number of strategic options for Ford, some of which are-

  1. Reposition the company & brands away from the wreckage of the Big 2, as a revitalized green, design and technology-focused car company. Ford’s latest ads seem to be signaling this.
  2. Mimic the successful Renault-Nissan tie up by seeking strategic partnerships with complementary firms to secure greater scale, technology and market access. Potential partners include PSA Peugeot Citroen, Mitsubishi or Hyundai;
  3. Build some “home field advantage” in Europe to secure strategic government assistance. The UK could serve as a home base as Ford already is number 1 in market share and has been operating there for over 90 years;
  4. Do a better job of leveraging European technology and design into North and Latin American models.  Traditionally, Ford has been very poor at this.  

So far, Ford has won some key battles but will they win the war?

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