Ford Motor Company (FMC) is an American automobile manufacturer with over 100 years industrial experience. Major competitors in the United States (US) include General Motors (GM) and Chrysler Corporation (CC). At the peak of the 2008 global financial crisis, these three automakers faced possible bankruptcy. The Troubled Asset Relief Program (TARP) was created in 2008 by the US government to provide funding for private sector corporations facing bankruptcy. The stated objective of this social intervention was to protect the US economy from devastation. Horton (2009, p. 221) argued that this type of government intervention in the free market economy has been a historical mistake that stifled competition and both economic and legal luminaries concurred that this approach is a hindrance to economic growth. It is widely known that the 2008 crisis stemmed from unethical behavior in the subprime mortgage market. The question that FMC leaders faced at that juncture was whether to accept the TARP funds or not. In the following sections, I demonstrate why this was an ethical dilemma, and provides an incisive analysis of how FMC used this defining moment to transform the company into one of the leading ethical company worldwide. Ethical Decision Making at FMC According to Ferguson (2012, p. 230) FMC has its sights set on becoming the world leader in quality, safety and sustainability. FMC repeated demonstration of ethical leadership propelled the company from the brink of bankruptcy in 2006 into an enviable dominant position in the automobile industry today. How did they achieve such a phenomenal turnaround? Firstly, in 2006 they mortgaged most of their valuable assets. Then, in 2008 they did not accept TARP funds. Their earl... ... middle of paper ... ...d stepping down as automaker’s Chief Executive. New York Times. Retrieved June 15, 2014, from http://www.nytimes.com/2006/09/05/business/05cnd-ford.html?_r=0 Modica, M. (2014). Why some Americans will never buy a GM vehicle. National Legal and Policy Center. Retrieved June 14, 2014, from http://nlpc.org/stories/2012/06/14/why-13-americans-will-never-purchase-gm-vehicle Priester v. Ford Motor Company, 131 Supreme Court of United States. 1570, 179 L. Ed. 2d 471 (2011). Rinallo, D., Basuroy, S., Wu, R., & Jeon, H. J. (2013). The media and their advertisers: Exploring ethical dilemmas in product coverage decisions. Journal of Business Ethics, 114(3), 425-441. doi:10.1007/s10551-012-1353-z Selart, M., & Johansen, S. T. (2011). Ethical decision making in organizations: The role of leadership stress. Journal of Business Ethics, 99(2), 129-143. doi:10.1007/s10551-010-0649-0
GM should continue to use its technological advantages to create innovative automobiles, but do so cautiously. GM should follow the direction of today’s environmentally conscious consumers who want less expensive, economical automobiles. GM should primarily utilize a cooperative game-theory approach in its sales and marketing strategies in order to stay in sync with the current automotive industry needs.
Roth, Carol. "US Auto Bailouts Weren't a Success." CNBC 10 Dec. 2013: n. pag. Print.
General Motors became a “centralized organization, so decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels” (Ferrell et al., 2015, p. 199). Centralized organizations have little upward communication and top-level manager may not be aware of problems and unethical activities. According to Ferrell et al., (2015), it has been noted that “centralized organization may exert influence on their employees because they have a central core of policies and codes of ethical conduct” (p. 201). Conversely, to survive at GM employees praised the CEO intelligence and carried out their orders by keeping a low profile, and never made waves. GM rewarded employees who followed the old traditional ways and those that challenged their thinking lost promotion opportunities or their jobs. However, General Motors experienced conflict between corporate management responsibility and social responsibility. Consequently, General Motors “attempted to implement a new mentality upon its management in a short period of time” (Goussak, Webber, & Ser, 2012, p. 49) by changing the company’s environment, but
In the United States, modern car manufacturing has been historically dominated by the American companies including Ford Motor Co., Chrysler Group LLC, and General Motors Co. These three companies, known as the Detroit Three, controlled 95% of the market in the 1950’s and the dominance continued until the beginning of the 21st century. In the 1980’s Japanese auto manufacturers entered the United States, a decade later the Germans, and finally in 2000’s the Koreans. By the end of 2009, the Detroit Three only accounted for 45% of the total U.S. auto market. Another factor that had influence on this was constant fluctuations in gasoline prices and price sensitive consumers. According to the U.S. Department of Energy, gas prices hit record high averaging $3.07 per gallon in May 2007 and kept climbing up to $4.08 in July 2008. As gas prices kept increasing, consumer buying trends have been changing. In 2006 sales for SUVs, pickup trucks, and vans dropped 16%, while the market for compact cars rose by 3%. Unfortunately, the Detroit Three were not prepared for this since their...
Achieving world class business performance is a major challenge in today’s society. Manufacturing companies continue to face increased competition and globalization from its competitors. (1, p. 148). The automotive industry is one of the most volatile manufacturing industries that we have, which was evident in the 2008 – 2010 automotive industry crisis. (2) This global financial downturn served notice to the American automotive manufactures to raise the bar, in order to achieve word class business performance. General Motors, one of the country’s largest automotive manufactures, had to receive a government bailout to survive. During this time many with the corporation asked themselves, if we were a world class business, would we be facing this pending crisis. The answer was a resounding “NO”. General Motors has come out of bankruptcy and is focused on being a world-class business organization.
Bailouts have been tried in the auto industry, and they don’t work. In 2009, Democratic leaders in Congress created a plan to provide over $25 billion to Detroit, along with the $25 billion in loans the government had already committed to help the same auto industries make more fuel-efficient cars. In my opinion, the problem wasn’t the industry, the problem was the companies. The real problem for General Motors, Ford, and Chrysler is that their management didn’t work, and they can’t make cars of high enough quality to attract American buyers. Giving money to the same people who couldn’t get it right in the first place wouldn't solve any of that. The government bailout allowed GM, Ford and Chrysler to avoid necessary cost cutting which should
Companies whose success and continuous operation prove vital to the economy and financial systems should receive auditor scrutiny and regulation oversight. It is clear that Lehman Brothers required oversight and possible prohibition of its liabilities financing practices using repo borrowing. Likewise, AIG deserved more review of its credit swap business practices. The negligence of these institutions cost the United States and foreign economies billions of dollars. The federal government chose not to intervene on Lehman Brothers’ behalf, for reasons that some say are inconsistent with other bailout decisions (Smith, 2011). However, the government did find that an AIG failure would constitute systemic risk and chose to rescue the insurance company. The government created incentives to increase depositor confidence by guaranteeing market-based fund-raising. The financial crisis of 2008 offered lessons learned to both government and banking
Henry Ford was one of the principle illustrators of Scientific Management. He revolutionized the concept of mass production and changed the world by developing new, innovative business practices that enhanced efficiency and productivity. He created a manufacturing model that marked an era and led industrial manufacturing to continuously grow around the world, a model that is known as Fordism. Fordism brought success and innovation, not only to the whole American manufacturing industry, but also all over the world between the years 1903 and 1926 (Smith, 2011). However, these practices were not always as perfect, as there are many drawbacks within his practices that influenced both Ford Motor Company and the motor industry as a whole, which brought
With any story, there’s two sides of the coin. On one side, advertising and public relations have become an integral function of our consumerist economy because it provides information to consumers regarding the products and services that attract them. In addition, advertising and PR generates competition between businesses which fuels the economy, causes growth, and benefits consumers. On the opposite side, advertising and PR can be seen as the manipulative corporate hand in the public sphere that uses aggressive sales tactics, false claims, and clouded perceptions to serve their own self-interests which in turn fragments consumers. Both sides could be argued for, but it’s up to organizations like the FTC and the IAE to guide the advertising and PR industries down an ethical path that leads to the benefit of consumers rather than as the force of manipulation. An interview with the IAE, the president of Global Advertising and Strat...
LeBeau, Philip. "Tesla Soars, Ford Falls in 'Consumer Reports' Study." CNBC.com. N.p., 25 Feb. 2014. Web. 20 Mar. 2014.
Despite of these good things, Ford Motor faced a loss due to some wrong decisions taken by the management regarding their business strategy. The decision of centralizing the management made them think narrowly which results in too much Americanization and ignorance of local market in the rest of the world. This caused losing global market for them.
Ford Motor Company current mission statement is “committed to provide personal mobility for people around the world”. With that in mind their vision is to become the world’s leading Consumer Company for automotive products and services. By improving everything they do, the company provide superior returns to their shareholders (Vision, Mission, Values).
The New York Times Company. (2011, August 3). Ford motor company. Retrieved August 16, 2011, from The new york times: http://topics.nytimes.com/top/news/business/companies/ford_motor_company/index.html
Although “The Big Three” dominate the market, there are other players in this industry, though most operate as foreign branches. A good example of these is The Three Asian companies: Toyota Motor Corp, Honda Motor Co. and Nissan Motor Co. According to Checkonomics (2006) their combined market share in the U.S. had gone up to 40.61% by 2005. As shown in a report by Graduate School of Business, Stanford University (2000), these six shared the market with Volkswagen, although local consumers also imported vehicles from other countries.
The Ford family still controls the company through multiple voting shares, even though it owns a much lower proportion of the equity. Ford’s business strategy is the integrated cost leadership/ differentiation strategy; this involves engaging in primary and support activities that allow the company to simultaneously pursue low cost and differentiation. This strategy is flexible and enables Ford to use technology to control the production of a variety of products in moderate, flexible qualities and with a minimum manual interaction, whose goal is to eliminate cost verse product variety. Cost leadership is a strong strategy, but it can be undermined by the frequent changes in technology, the imitation of cost advantage and the loss of focus on consumers. Ford’s differentiation strategy focuses on developing a unique product that consumers are willing to pay for, and the combination of these two strategies enables Ford to stay on its core competencies.