A Proforma Statement on the Ford Company

Introduction

The automobile industry began with Henry Ford's production of the Model T in the early 1900's. With the creation of the assembly line, cars became cheaper and quicker to produce, thus making them affordable for many people. There were originally 500 auto manufacturers. By 1908, there were only 200; and in 1917 only 23 remained. This vast reduction was due to large amounts of consolidation within the industry. Currently, the major competitors within the industry are Ford, DaimlerChrylser, General Motors (GM), Honda, Toyota, and Volkswagen. A few United States (US) manufacturers produce 23% of the world's vehicles while Japan is responsible for 21%. The tendency for the industry is to be a global producer of automobiles; parts can be made throughout the world and assembled in many different places. The trend of consolidation has continued throughout today.

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According to the company, Ford's prime focus in the 21st Century will be on the consumer. Ford's management stated, "Our vision is to be the world's leading consumer company that provides automotive products and services." In addition, Ford has made a deal with Microsoft in an effort to take advantage of the MSN CarPoint service. In addition, Ford recently announced an agreement with Yahoo! which will allow car owners to register their cars online. Their plans project that cars will be able to connect within 3 years. That online service is known as "24-7." With this service car owners will see such benefits as: being able to get service reminders, information on credit accounts; and real-time traffic reports. Voice-activated Internet access is also projected to be available within 3 years. With that service, things like email capabilities and direction retrieval will be possible in a "hands-free" atmosphere. Ford is also trying to expand in the area of e-commerce. Their focus is on five areas: Telematics, Business to Consumer, Customer acquisition, Customer retention, and Business to Business. Ford is striving to make advances that will keep it competitive in a global market during the information revolution. Financial Analysis: General Ford has shown a steady pattern of sales growth from 1994 to 1997, growing at 5-7% each year. However, in 1998 sales were down 6%. In 1999, sales were up 14% from the previous year, giving them an average over the 94-99 period of 5.4% growth. Profit margin has remained steady, always ranging between 7% and 9%, slightly above the industry average. Cost of goods sold has remained around 72%, which shows consistency within Ford's manufacturing plants. Ford's borrowing can be explained by its leverage ratios. Ford's debt ratio has remained relatively steady over the last 5 years. 1998's debt ratio was 82.65%. This shows how they were relying heavily on borrowed funds to finance operations. This is further evinced by Ford's debt-to-equity ratio of 4.77 in 1998, which is up from past years. Compared to the 1.97 industry average, Ford's number appears quite high.

Ford's times-interest-earned for 1998 was 3.68, an increase from ...