Ford Motor Company

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Ford

Industry Analysis

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. Presently, this is evident in the recent acquisition of Chrysler by Daimler-Benz in late 1998, thus forming DaimlerChrylser. These consolidations have proved beneficial to consumers since companies have been able to reduce costs and pass those savings on to the customers. Some of the other major examples of consolidation are Nissan selling off a controlling 37% interest to Renault; General Motor’s 49% ownership of Isuzu; and Ford’s 33% majority of Mazda. Other efforts to become more competitive have translated into the European Union dropping trade barriers and European carmakers employing cost reducing efforts. American manufacturers have seen 2-3% growth over the last few years. Some current trends are the explosion in popularity of the Sport Utility Vehicle (SUV) and big luxury vehicles.

In the future the global car market is full of potential. There are currently 44 million vehicles and by the year 2002 experts estimate that number will grow to 64 million. That growth is not expected to be in the US, rather in countries such as: China, India, The Pacific Rim, South Africa, and South America. In America, a current trend is for the neighborhood car dealer to be purchased by a large manufacturer, such as GM, so cars can be sold through retail outlets. Other future endeavors include low emission cars, which are expected to provide expansions in sales. Some major automakers are investing in fuel cells, devices that convert liquid hydrogen into elec...

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...or a comparison reference, the CAPM produces stock values between $37.61 and $54.38 and a weighted-average of $50.09. Using the January 1st stock price of $52.75, it appears that Ford’s stock is correctly valued. This makes sense, considering that Ford is a large, widely held, and often-analyzed firm.

Sources

Web Sites:

http://www.askjeeves.com

http://www.astonmartin.com/

http://www.auto.com

http://www.bloomberg.com

http://www.cbs.marketwatch.com/

http://www.cnbc.com

http://www.cnnfn.com

http://www.fool.com

http://www.ford.com/

http://www.fortune.com

http://www.hoovers.com

http://www.jaguar.com

http://www.lincolnvehicles.com

http://www.mazdausa.com/

http://www.mercuryvehicles.com/

http://www.morningstar.com

http://www.msn.moneycentral.com

http://www.quicken.com

http://www.smartmoney.com

http://www.thestreet.com

http://www.uaw.org

http://www.volvocars.com/

http://www.yahoo.com

http://www.zacks.com

Books:

Brealey, Richard A., and Myers, Stewart C. Principles of Corporate Finance. Sixth ed. McGraw Hill, New York, © 2000.

Brigham, Eugene F., and Houston, Joel F. Fundamentals of Financial Management. Second ed. Dryden, New York, © 1999.

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