Company’s History and Growth

Ford Motor Company (FMC) is an American multinational automaker based in

Michigan. It was founded by Henry Ford and incorporated on June 16, 1903. Ford is the
second largest automaker in the U.S. and the fifth-largest in the world based on annual
vehicle sales in 2010. During the automotive crisis (2008 – 2010), Ford's worldwide unit
volume dropped from 5.532 million in 2008 to 4.817 million in 2009. In 2010, Ford
earned a net profit of $6.6 billion and reduced its debt from $33.6 billion to $14.5 billion
lowering interest payments by $1 billion following its 2009 net profit of $2.7 billion. On
June 2, 2008, Ford sold its Jaguar and Land Rover operations to Tata Motors for $2.3
billion. In January 2009, Ford announced a $14.6 billion loss in the preceding year,
making 2008 its worst year in history. The reason for the sales drop is because consumer
started to move to more environmental friendly car and global economy recession. FMC
did not become aware of the trend until it had affected sales significantly. Ford launched
a full organization re-engineering business process plan called "Ford 2000" aiming at
reestablishing the company's infrastructure. The process meant reduction in their Vehicle
Centers (VCs) to only five covering the operations that spanned 200 countries. It also
meant cutting redundancies and requiring Information Technology (IT) to be the driving
force and the link between Ford centers worldwide.

SWOT analysis
Ford Motor Company (Ford) is one of the largest automotive manufacturers in the
world. The company's automotive vehicle brands include Aston Martin, Ford, Jaguar,
Land Rover, Lincoln, Mazda, Mercury and Volvo. The company manufactures and
distributes automobiles in 200 markets across six continents. The Ford Asia, Africa
and Ford Mazda operations recorded strong performance in fiscal 2005. Strong Ford
Asia, Africa and Ford Mazda could prove to be a significant revenue and profit driver
in the coming years. Intense competition from Japanese companies, however, could
lead to further deterioration in the North American operations of Ford.

Strengths

Strong Ford Asia, Africa and Ford Mazda operations:

The Ford Asia, Africa and Ford Mazda operations recorded strong performance in
fiscal 2005. Revenues from Ford Asia, Africa and Ford Mazda reached $8,245 million
in 2005, up 18.5% over 2004. More importantly, this segment recorded an income
before taxes of $297 million in fiscal 2005, up from $82 million in fiscal 2004. Strong
Ford Asia, Africa and Ford Mazda could prove to be a significant revenue and profit
driver in the coming years.
Growing Ford Europe and PAG:
The Ford Europe and Premier Automotive Group (PAG) recorded strong revenue
growth in fiscal 2005. The Ford Europe and PAG primarily include the sale of Ford-
brand vehicles in Europe and Turkey as well as sale of PAG brand vehicles (Volvo,
Jaguar, Land Rover and Aston Martin). Revenues from Ford Europe and PAG
reached $60,258 million in 2005, up 11.3% over 2004. Ford Europe and PAG
accounted for 34% of total revenues. Growing Ford Europe and PAG has enabled the
company to offset revenue decline in the Americas division.

Weaknesses

Weakening North American automotive operations:

Ford's automotive operations in North America recorded a weak performance in fiscal
2005. Revenues from automotive operations in North America fell by 2.4% to
approximately $80,600 million in fiscal 2005. Furthermore, automotive operations in
North America recorded a loss before taxes of $2,500 million in fiscal 2005, as
compared to an income before taxes of $684 million in fiscal 2004.
The weakening of automotive operations in North America is due to competition from
Japanese companies and a market shift away from fuel-guzzling light trucks such as
sports utility vehicles toward more fuel efficient vehicles. Ford relies more on truck
sales than other vehicle manufacturers. Truck sales accounted for 67.2% of its US
vehicle sales, whereas in case of most other vehicle manufacturers, truck sales
account for only 56% of total vehicle sales. Stagnating truck sales in the US, on
account of high fuel prices, has hurt Ford more than the others. Japanese competitors
such as Toyota have also taken market share away from Ford. The company's share
of the US light vehicle market, the largest in North America, has fallen from 19.3% in
fiscal 2004 to 18.2% in fiscal 2005. Ford's automotive operations in North America
accounted for about 45.5% of total revenues in fiscal 2005. Any continued weakening
of automotive operations in North America would adversely affect the financial and
market position of the company.

Tarnished brand image:

The brand image of Ford has been tarnished owing to persistent product recalls. In
2000, the US Department of Transportation investigated 271 tire tread separations
largely involving Ford's sports utility vehicle, Explorer. Ford spent $2.1 billion in 2001
replacing 13 million tires made by Bridgestone/Firestone. In 2001, Ford recalled new
Escape sports utility vehicle five times in four months owing to quality issues. During
January 2005, Ford recalled about 792,000 pickup trucks and sport utility vehicles
because of a fire risk from overheating of the speed control switch. According to a
leading consumer magazine, an eight year old Toyota is as reliable as a three year old
Ford with 54 problems per 100 vehicles. Tarnished brand image has negatively
impacted Ford's sales in the US.

Large unfunded pension and other obligations:

Ford has significant unfunded pension, health care and life insurance obligations. By
the end of 2005, Ford's total pension obligations, including the US and non-US plans,
totaled $74,595 million, while pension assets (US and non-US) totaled $63,784
million, which resulted in unfunded pension obligations of $10,811 million. Total health
care and life insurance obligations of Ford stood at $39,274 million at the end of 2005,
while the plan assets stood at $6,497 million, resulting in unfunded health care and life
insurance obligations of $32,777 million. Unfunded pension, health care and life
insurance obligations would negatively impact the cash flow position of the company.

Opportunities

The way forward plan:

In the beginning of 2006, Ford launched a restructuring plan to improve the
performance of its automotive business in North America. This plan aims to make the
North American business more customer-focused, product-driven and efficient. The
North American capacity is likely to be realigned to match demand, with 14
manufacturing facilities to be idled, resulting in significant cost savings and reduced
employment of 25,000-30,000 employees. Capacity will be reduced by 1.2 million
units, or 26% by 2008, which represents a majority of actions within the restructuring
plan's 2006-2012 period. 'The way forward plan' focuses on restoring Ford's North
American automotive operations to profitability by 2008.

Hybrid vehicles:
By 2010, more than half of Ford, Lincoln and Mercury products are expected to switch
over to hybrid electric engines. Ford is planning to expand its capacity to produce up
to a quarter of a million hybrid vehicles a year. Demand for hybrid vehicles is
increasing worldwide owing to stringent emission standards, higher fuel prices and
growing environment-consciousness. Hybrid engines are more fuel efficient and less
polluting than conventional gasoline and diesel engines. Ford's focus on hybrid
electric vehicles could help in turning around its North American operations.

Opportunities in India and China:

Ford reinforced its commitment to the Indian market during 2005 by launching the
Ford Fiesta. While in China, Ford sales were up 46% in 2005. China and India are
expected to drive global demand for light vehicles through much of this decade. Light
vehicle production in China is expected to increase from 4.3 million units in 2005 to
7.7 million units in 2010 while light vehicle production in India is forecast to increase
from 1.4 million units to 2.5 million units during the same period. Growing vehicle
markets in India and China would provide an opportunity for the company to diversify
its revenues.

Threats

Rising raw material prices:

Steel prices, after declining by about 30% in 2005, have stabilized, but could rise to
higher levels if industry consolidation continues. The price of hot rolled steel coil rose
from $386 per ton in January 2004 to a high of $653 per ton in November 2004 and
thereafter fell to a low of $493 per ton in July 2005 owing to de-stocking in inventories
and changeover of China from a net importer to a net exporter. Since then steel prices
have stabilized and recovered some of the lost ground. Hot rolled coil prices averaged
$579 a ton during the first four months of 2006. Demand outlook for steel has
strengthened in recent months owing to pick up in global industrial production and
restocking due to low inventory levels. Hot rolled coil prices are expected to average
$572 a ton in 2006. Ongoing industry consolidation in the steel industry, however,
could push prices to higher levels. In June 2006, for instance, Arcelor merged with
Mittal Steel to form the largest steel company in the world. High crude oil prices have
also led to an increase in polymer prices. Plastic materials are used extensively in the
automotive industry. Oil prices reached as high as $78.4 a barrel during July 2006.
Recovering steel prices and rising polymer prices could adversely affect the
company's profit margins.

Increasing competition:
Ford's market share in the US light vehicle market has declined from 22.8% in 2001 to
18.2% in 2005 thanks to competition from Japanese companies among other
reasons. Ford is facing intense competition from Japanese vehicle manufacturers
such as Toyota and Honda. Toyota's share of US light vehicle market has risen from
10% in 2001 to 13% in 2005, while Honda's share has improved from 6.9% in 2001 to
8.4% in 2005. Nissan, another Japanese competitor, improved its market share from
4.1% to 6.2% during the same period. After establishing a strong market position in
the passenger cars segment, Japanese companies are now eyeing the lucrative light
trucks segment. Toyota, for instance, is aggressively pursuing market share in the
light trucks segment through its Tundra range of trucks. Intense competition from
Japanese companies could lead to further deterioration in the North American
operations of Ford.

Low capital spending:

Ford's capital spending, including research and development expenditure, is lower
than its competitors, which could affect its competitiveness going forward. In 2005,
Ford's capital spending was $1,766 per vehicle, as compared to Honda's $3,193 per
vehicle and Toyota's $2,937 per vehicle. Consequently, Ford would be able to replace
only 59% of its existing vehicle range with new models during 2006-2009, while
Honda would replace 93% of its existing vehicle range with new models during the
same period. Toyota, meanwhile, is poised to replace 90% of its existing product
range during 2006-2009. An aging vehicle range would adversely affect growth
prospects of Ford.

Information on the External Environment

Fuel Price Hike:

With the price of petrol increased in a fast pace ($90 per barrel on March 2011), many
motor companies, including Ford are facing hard time to sell their fuel-guzzling car. Thus
many car companies are finding new ways to build a more environmental-friendly car.
The leader of this field is mainly the Japanese auto makers (Toyota, Honda and Nissan).
They are the leaders in producing economical yet powerful engine. They are the leaders
in Hybrid technology and electric engine technology too. Many countries like the Europe
and Japan are imposing strict CO2 level on car emission. Those countries impose heavy
tax on car that is not environmental friendly.
Competitors:
With the rise of the Japanese Big Three car makers (Toyota, Honda and Nissan) and the
invasion of the European car makers, Ford is facing a hard time to increase its sales
volume. The Japanese car makers can sell their car at a lower price due to cost-cutting
strategies which include re-cycle and re-use the old part and low labor cost. The Japanese
car makers are also well-aware of the consumer needs. Quality control and
environmental-friendly car are their company’s main focus point.

Recession:
The financial crisis from 2007 to the present is considered by many economists to be the
worst financial crisis since the Great Depression of the 1930s. It contributed to the failure
of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars,
substantial financial commitments incurred by governments, and a significant decline in
economic activity. America giant auto makers are facing bankruptcy.

Analysis

The most critical part that Ford has to tackle effectively is the weakening North American
automotive operations. There are two basic ways to solve this problem:
1. Web Technologies
2. Knowledge Management

Web Technologies

Advantages:

1) Substantial cut in training cost due to the user-friendly interface of web

applications.

2) The speed of development made vital applications available to different

individuals across the company. For example, the B2B site allowed suppliers
remote and secured access to various sections of Ford's Intranet. In addition, the
development team created an application as a virtual teardown on Ford's website
where Ford's engineers could examine parts of competitors' cars and evaluate any
new technologies. The alternative would have been an actual trip to a physical
location where Ford tears down cars to examine the parts.

Disadvantages:

1) Increase in database maintenance cost.

2) Risk of information leak.

Knowledge Management
Advantages:

1) Improve information sharing within the company.

2) Improve efficiency in decision making.

Disadvantages:

1) Increase in database maintenance cost.

2) Risk of information leak.

Verification Knowledge Management Implementation at Ford Motor Company

The Ford KM application is in product verification (within Ford product development),

where the corporate strategy dictated the need to re-use prior verification information and
to rigorously follow the systems’ engineering principles, in order to reduce verification
costs and improve product quality.  This necessitated the creation of a KM process and a
system to implement the verification strategy.

1. Product Development at Ford

Product Development at Ford involves three major stages, leading up to the manufacture
of the vehicle:

Planning is the first stage of product development, where customer/market wants &
program scope are identified, timing plans developed and engineering team is named. 
The engineering team develops the target cascade and the initial design / verification
plans.  The design stage involves the designing of the components, systems and vehicle to
meet the pre-determined requirements.  The Verification process makes assessment on
the designs and verifies/documents that they meet or exceed the requirements.  Making
the product involves manufacture of the components and assembling the vehicle.

2. KM and Corporate Verification Strategy

Managing product verification costs contributes both to the top-line growth of the
automotive business (through improved quality and increased sales) and to the bottom-
line growth of the company (through cost reductions, thereby enhancing shareholder
value).  Ford management seeking to improve both shareholder value and product quality
targeted the product verification process and commissioned a team to review the
corporate verification strategy (with Mckinsey & company as consultants).  This team
developed the verification strategy, code named “Eureka”, which drove home the need
for KM within Ford.
Development of prototypes and physical testing of vehicles contributed to more than half
of product verification costs.  Hence, the logical way to reduce costs was to reduce the
amount of testing, which also would reduce the number of prototypes required.  Vehicle
testing could be reduced only through Re-Use of past verification information, increased
use of CAE (Computer-aided Engineering or computer simulation) and the rigorous
implementation of Systems Engineering principles (where components and systems were
individually tested and verified, thereby limiting total vehicle tests).   These principles
became the corner stones of the Eureka Verification Strategy. 

VPIM, Re-use and KM

Re-use of prior product verification information, thus became a critical aspect of the
Verification Strategy.  To successfully reuse legacy data, the data should be available
(stored), should be accessible (meta-data) and delivered to the user in the right format at
the right time (context). Decisions whether to carry-over a part or use anew parts,
historical quality and warranty metrics, development of the verification plan and use of
CAE or physical prototypes are made up-front in the product design process.  The
product verification process was revised to accommodate additional decision making
steps, due to the incorporation of the re-use strategy and systems’ engineering principles.
The information and data needs of the new product verification process were supported
by Verification Product Information Management (VPIM). VPIM, therefore, focused not
on what Ford had in its databases but what it needed to have to optimize the design
engineering process.

VPIM is the complete management of all verification information (both physical and
analytical), to maximize customer satisfaction and product quality.  VPIM integrates
engineering processes, business logic, web technology, and enables seamless integration
of multiple databases to manage verification information.  The User interface to VPIM is
a Portal named myVerification Portal.  myVerification Portal is a Web-enabled
Knowledge Management system that allows Ford engineers to Manage, Review,
Document and Sign-off on product verification deliverables based on requirements,
historical data and warranty issues.

Verification Process (Requirements a Sign-off)

Vehicle Requirements are set using generic requirements, historical verification reports,
Program Direction Letters, Failure Modes and Effects Analysis (FMEA), competitive tear
down studies, potential new technologies and warranty/reliability analysis to develop the
next generation vehicles that are more robust than the previous models and are best in
class in competition. The target cascade process takes the vehicle requirements and
breaks it down to the system, sub-system and component levels.  The verification process
ensures that component/systems meet their targets individually and collectively in a
complete vehicle. The aim of the Verification PIM is to enable users to seamlessly access
relevant information from data repositories to reduce the time required to validate a
requirement by:
 Streamlining the individual procedures in the process.
 Enabling the "look" into different data repositories via user preferences.
 Linking the requirements to verification methods/procedures, along with their
confidence
 Maximizing reuse of historical data so that requirements can be signed off without
testing.
 Integrate expert tools that can be used for "what-if" scenarios, enabling cross
attribute communication.
 Automatic Archival of the information for reuse for the next generation.
 Correlation between CAE & Test as well as CAE/Test & customer life cycles.

3. Strategy Endorsement

In May of 1999, Chief Technical Officer and VP, Mr. Neil Ressler, endorsed the
EUREKA Product Verification Strategy. This strategy included the proposal for
verification information knowledge management to facilitate reuse, as one of 7 key
elements.  The knowledge base team from Eureka was reconstituted as Verification PIM
(VPIM) to implement the knowledge management within the Enterprise product
information management system.

4. VPIM Methodology

The Verification PIM and myVerfication Portal, in addition to enabling integration of

multiple databases, would be driven by the engineering processes, thereby providing the
engineer high value consistent with corporate business practices. A position paper on
Corporate Portal strategy identified the benefits of implementing VPIM through its
integration to existing data sources, eliminating redundancies.  In effect, the PIM and the
Portal bridge the Engineering processes, Business Models, Technology developments and
customer needs.  The Business interface brings the Business Logic and the business
objectives of the project into focus.  The process interface describes the underlying
engineering processes that are implemented within verification PIM and it should be
noted that the project looks both at the "as-is" and "to-be" processes.  The technology
interface identifies all the technology needs of the project and the customer interface is
the portal interface.  The technology and user interface elements will be touched in this
paper with references to the details.

Business Objectives
 VPIM, a key enabler to implement the Eureka Verification Strategy.
 Enable re-use of CAE & Test information (from data elements to complete sign
off)(Eureka identified $6 Million savings in Verification costs for Durability
Attribute)
 Use workflow to streamline the product verification process and reduce time to
market.
 Create an "Umbrella" structure to manage ALL product verification information.
 Ensure linking of CAD, CAE and Test data to customer requirements.
 Easy, automated storage/archival of test & CAE information.
 Create efficiencies through the elimination of Design and Release (D&R)
Engineers aimlessly searching for information.
 Provide the end user (D&R) all information required to make engineering
decisions
 Provide information in the context and steps that an engineer can easily complete
a task/deliverable.
 Document and track current CAE/Test capabilities and facilitate prioritization of
future development.
 Implement a robust knowledge management process within PD and use the " best
" knowledge to make decisions

Process Deliverables

 Definition of the life cycle process to enable product design verification.

 Identification of "GAPS" in both data and process, to enable life cycle
management.
 Definition of existing data sources and their linkage to Verification PIM.
 Durability Process.
 All other Attribute Processes.
 Cross Attribute integration & optimization.
 Unique Commodity Specific processes (Body, Chassis, etc.).
 Establishment of Metrics to track Verification Cost, Timing and Quality
performance.
 Mapping of requirements to CAE/Test Verification Methods, along with
confidence.
 Establishment of storage & retention criteria for the CAE/Test data (results,
conclusions, models, etc.).
 Development of automated "Loading" mechanisms to store CAE and Test
information.
 Establishment of storage & retrieval of relevant Bill Of Materials (BOM)
associated with CAE & Test.
  Visualization capability to compare CAE models & Test Prototype versions to
associated CAD.

Technology Interface

Engineering Processes, depending on attribute selection and component, system or full

vehicle testing, are mapped into the portal using rule-based mechanisms (tool: Blaze
Rules Engine).  These rules define the paths to be taken, in user case scenarios, enabling
the validation of a part/system/vehicle.  Additionally, the Portal middle ware (tool:
Weblogic) would tie into the Requirements database, the Warranty System, the Enterprise
Knowledge Base, the Lessons Learned Database and the relevant department's Home
page using the user's profile to extract the information. For historical data, the portal
would get information from Proving Grounds data base, Test and CAE DBMS that retain
archived information.  Portal scenarios using the above technologies provide
customization, personalization, real-time connection to databases and dynamic
representation of data that can be manipulated using OLAP tools, by the user ( tool:
Spotfire).

Management Profiles would generate a birds-eye view of the process, current state of the
requirements (red/yellow/green), graphical representation of the "program health" and
metrics documenting cost savings due to reuse of material, commodities & processes &
use of CAE or lab testing. The portal enables comparisons with historical programs and
the generation of reports where snapshots can be dragged-and-dropped into a
collaboration folder.

Customer (User) Interface

myVerification Portal is the user interface to the customers of verification PIM.  The key
customers are D&R Engineers, CAE & Attribute engineers, Test Engineers and
Management. 

Engineering User

The portal provides the relevant information to the user, using a sophisticated set of
personalization and customization rules using LDAP and preferences. The mapping also
can reflect the deliverables of the milestone - early milestones would place more
emphasis on Expert Tools and CAE and after prototype build, they would have full
vehicle tests. There are several different ways to navigate through the process - hierarchy,
blocks based on set preferences or navigation map. Charting and process flow definitions
using NetCharts from Visual Mining are used to depict Metrics to check on the
robustness of the process and data validity studies.  A salient feature of the portal
implementation is that "ease of use" takes precedence to "functionality".  Constant and
critical reviews of the development with the engineering community ensured that the end
product will be used exclusively to conduct verification business on the programs.

Management User

The portal provides management, customized and personalized information relevant to

their responsibility and authority, all verification information to enable decision-making.
Salient features are listed below:

1. Metrics to assess the state of "Program Health", along with associated risk.
2. Summary information Product Verification Status, with access to detailed
information, if necessary.
3. Metrics to measure cost savings within Product Verification including.

3.1. Savings due to reuse of parts, commodities, materials, processes.

3.2. Savings due to use of CAE or Lab testing.

3.3. Savings due to process reengineering like reduction of durability routes,

etc.

3.4. Savings due to validation of components and systems, before vehicle

testing.

4. Quality improvements due to verification methods correlated to customer usage.

5.  Timeliness of Verification Methods/procedures & their effect on program timing.

1. Benefits

Business case developed for Verification PIM on Durability attribute for Suspension
system using the myVerification Portal showed significant gains, both to the user of the
tool (product engineers) and to the corporate stakeholders.  These benefits are listed
below:

Tangible benefits

 Efficient Search/Retrieval of Legacy program and benchmark information

(Corporate survey documented about 34% of engineer’s time wasted on
searches).
 Reduction of training for multiple systems and processes.
 Program prototype reduction.
 Warranty reduction (cost avoidance).
 Establishment and monitoring of metrics for CAE/Test procedures, in terms of
quality and capability.

Intangible

 Best-in-industry product verification process, focusing on cross-attribute

efficiency.
 Improved process decision making.
 Highlight gaps in process, technology and content.
 Self-correcting/Generating learning system.
 Well managed computer system/data base obsolescence.
 Improved product development process effectiveness.
 Reduced Warranty and improved product & process quality.