Ford 2009 Annual Report Download - page 18

Management’s Discussion and Analysis of Financial Condition and Results of Operations
16 Ford Motor Company | 2009 Annual Report
Trends and Strategies
We continue to monitor incipient signs of economic recovery following the recent global economic crisis that caused
such a sudden and substantial decline in global automotive industry sales volume, and we remain firm in our belief that our
continued focus on executing the four pillars of our plan is the right strategy to achieve our objectives.
• Aggressively restructure to operate profitably at the current demand and changing model mix;
• Accelerate development of new products our customers want and value;
• Finance our plan and improve our balance sheet; and
• Work together effectively as one team, leveraging our global assets.
Despite the external economic environment, we have made significant progress in transforming our business:
Aggressively Restructure to Operate Profitably
Manufacturing. Our U.S. manufacturing presence includes 10 vehicle assembly plants and 23 powertrain, stamping,
and components plants. We have converted one North American assembly plant, and are converting two additional
assembly plants, from production of large utilities and trucks to small car production to support what we believe is a
permanent shift in consumer preferences to smaller, more fuel-efficient vehicles. In addition, nearly all of our
U.S. assembly plants will have flexible body shops by 2012 to enable quick response to changing consumer demands, and
nearly half of our transmission and engine plants will be flexible, capable of manufacturing various combinations of
transmission and engine families. We have announced plans in North America to close three Ford plants and one ACH
plant in the 2010 – 2011 period, as well as consolidating Wayne Assembly Plant into the Michigan Assembly Plant as part
of our plan to expand North American production capacity for smaller, more fuel-efficient vehicles. We are exploring our
options for our remaining ACH plants, and intend to transition these businesses to the supply base as soon as practicable.
Suppliers. We continue to work to strengthen our supply base in the United States, which represents 80% of our North
American purchases. As part of this process, we have been reducing the total number of production suppliers eligible for
new product sourcing from 3,300 in 2004 to about 1,600 suppliers in 2009 and 1,500 suppliers in 2010. To date, we have
identified specific plans that will take us to about 850 suppliers in the near- to mid-term, with a further reduction to about
750 suppliers targeted. We believe that our efforts at consolidation will result in more business for our major suppliers,
which is increasingly important with the decline in industry sales volume. In addition, our move to global vehicle platforms
should increase our ability to source to common suppliers for the total global volume of vehicle components, so that a
smaller number of suppliers will receive a greater volume of the purchases we make to support our global vehicle
platforms.
Dealers. Our dealers are a source of strength in North America and around the world, especially in rural areas and
small towns where they represent the face of Ford. At our current and expected future U.S. market share, however, we
have too many dealers, particularly in metropolitan areas, which makes it difficult to sustain a healthy and profitable dealer
base. To address this overcapacity, we are working with our dealers in efforts to downsize, consolidate and restructure our
Ford, Lincoln, and Mercury network in our largest 130 metropolitan market areas in the United States to provide targeted
average-year sales for Ford dealers of around 1,500 units and for Lincoln Mercury dealers of around 600 units. This should
result in sustainable dealer profits. As part of these efforts, the number of dealers in our Ford, Lincoln and Mercury network
in the United States has been reduced from about 4,400 at the end of 2005 to 3,800 at the end of 2008, and to 3,550 at the
end of 2009. These efforts, which include funding dealer consolidations to enhance our representation in the marketplace,
will continue in the future to reduce further our dealer network to match our sales and dealer sales objectives.
Product Development. In combination with the business improvements being achieved, our One Ford global product
development system ("GPDS") allows us to realize efficiencies in capital and engineering costs, to increase revenue, and,
in general, to bring to market a broad range of frequently-freshened, highly-acclaimed global vehicles that customers want
and value. In addition, GPDS allows us to accelerate to market the number of new products designed to meet shifting
consumer preferences, including, for example, preferences for smaller, more fuel-efficient vehicles. In 2010, globally we
will deliver substantially more new or freshened product by volume than 2009, bringing to market an unprecedented
volume of new products – with class-leading fuel economy, quality, safety and technology.