FORD AND TOYOTA END-OF-CHAPTER CASE SOLUTIONS Ford: FYE 12/31/12 Toyota: FYE 03/31/13 CHAPTER 2 2-62 1a. Ford was founded in 1919, and designs and sells automobiles. Ford operates an automotive sector and a financial services sector. The automotive sector has reportable segments consisting of North America (Ford and Lincoln brand vehicles and parts), South America (primarily Ford brand vehicles and parts in this geographic region), Europe (primarily Ford brand vehicles and parts in Europe, Turkey, and Russia), and Asia Pacific/Africa (primarily Ford brand vehicles and parts in Asia Pacific and South Africa). The financial services sector includes Ford Motor Credit Company (vehicle financing, leasing, and insurance), and other financial services (real-estate and holding companies). 1b. Factors affecting Ford’s profitability include: wholesale unit volumes, profit margins (which are affected by market factors such as the volume and mix of vehicles sold, costs of components and raw materials, warranty claims, and costs associated with safety, emissions, and fuel economy), and fixed structural costs, such that small changes in unit volumes can affect overall profitability. Factors affecting the auto industry in general include: (a) a competitive industry with many producers, none of whom are the dominant producer; (b) seasonality, whereby results of the third quarter are less favorable than those of other quarters because of high spring and summer demand; (c) raw materials costs and acquisition uncertainty; (d) low backlogs, (e) intellectual property that is difficult to develop, defend, and maintain, (f) and high potential warranty costs. 1c. Like Ford, Toyota operates in the automotive and financial services sectors, and does business in the same general geographic areas except that Toyota has a very large presence in Japan. Toyota’s discussion provides greater insight on the risks the company faces, and the challenges that they are working to overcome (quality lapses and the earthquake that struck Japan in 2010 and subsequent effects thereof). Toyota’s report also contains very detailed discussion of its “Global Vision”, which is a strategy-oriented © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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