COMPARATIVE ANALYSIS FORD MOTOR COMPANY TOYOTA MOTOR CORP

COMPARATIVE ANALYSIS: FORD MOTOR COMPANY TOYOTA MOTOR CORP dr Agata Kocia based on presentation by: PAWEŁ ORZECHOWSKI, MACIEJ OŚWIT & ANDRZEJ BENCZEK

FORD: the beginning Henry Ford designed his first moving assembly line in 1913 Ø “Wheels for the world”-the motto behind popularization of cars Ø Each section of the production process was divided into component parts Ø Combination of precision, continuity, and fastpaced brought the world – mass production Ø In Highland Park, Model T production reached record levels, every day a car came of the assembly line every ten seconds Ø

TOYOTA: the beginning Toyota's history began at the end of XIX century Sakichi Toyoda invented Japan's first power loom which revolutionized the country’s textile industry Ø Two years later, he founded the company Toyoda Automatic Loom Works Ø Toyody Sakichi’s son, Kiichiro Toyoda invested 100, 000 pounds in the creation of Toyota Motor Corporation in 1937 (TMC) Ø Sakichi Toyoda received this money for selling the patent rights to an automatic loom Ø Ø

FORD Ø Ø Ø The fourth-largest automotive company in the world in terms of sales Sells cars on 6 continents Car Brands: Ford, Mercury, Lincoln and Volvo l in March of 2010 confirmation of sale of Geely Automobile Holdings Ltd) Since the mid-90’s Ford continually loses significance in the American market Ø Over the same period steadily increases its share in the European market Ø Reasons for the gap between the development of the brand in the U. S. and Europe: Ø l l high labor costs in the U. S. high expenditure on healthcare in the U. S. strong trade unions in the U. S. (high pension commitments) strong economic growth in lower combustion cars

TOYOTA Ø The biggest carmaker in the world in 2009 (more than 7. 5 million cars) Ø Main markets are Japan and North America, but recently we can see a strong growth in Asian and South America markets Ø Toyota has three brands: Toyota, Lexus and Scion

FORD: more economic Dominance of large cars: SUVs, Pick ups Rapid fluctuations in oil prices and legislators striving to reduce consumption of materials led to reorganization Ø Restructuring of the three production lines for production of more economic models in Europe (Mondeo, Focus etc. ) Ø Ø l in short-run minimization of costs Ultimately, Ford intends to make engines in all their models to be more economical Ø In 2009 to market were introduced four hybrid models based on technology leased from Toyota Ø

FORD: hybrid technology Ø Currently, Ford has four hybrid models l Ford Focus Hybrid is a direct threat to so far the most popular Prius (hybrid line of Toyota) In 2010, the company plans to spend an additional $450 million to develop electric motors Ø By 2012, Ford wants to produce own hybrid technology and plug-ins Ø l Ø Ford has invested more than $550 million in restructuring its manufacturing facility in Michigan What if the market chooses a different path?

TOYOTA: hybrid technology Toyota as one of the first ones started a hybrid cars production line (including leasing its technology to Ford) Ø At present, hybrid Toyota - Prius line, represents approximately 73% of all hybrid vehicles sold in the U. S. Ø So far in the U. S. Toyota sold the 1, 000+ hybrid cars Ø In addition, Toyota announced its intention to manufacture electric cars with lithium-ion batteries “Toyota Plug-HV” Ø

FORD: ONE FORD Despite the very large amount of cars produced, so far Ford has derives small economies of scale by applying a separate, independent technologies and models for European, US and developing markets Ø “One Ford” – changed approach Ø l Ford moves the emphasis to universal models for use in different regions of the world (the first "world car"-new Ford Fiesta)

FORD: wrong sales model Ø From the 90 s Ford has created demand l l l Ø Ford exceptionally strong suffered from a crisis on a real estate market l l Ø sales on installments without interest charged discounts promotions combined with a loan in recent years, sales in the U. S. were strongly associated with the property market it is estimated that in California, 30% of car purchases has been financed with a mortgage Feeling the effects of this approach, Ford began to change strategy l l less emphasis on creating demand emphasis on quality and safety

FORD: developing markets Ford is mainly engaged in the American market, which slowly begins to lose its attractiveness Ø Ford’s task now is to develop a universal line for use in every country (European Ford Fiesta in the U. S. , Ford Transit Van in Asia) Ø Whether european car models will be appealing to clients in India or Brazil depends the future of Ford in the long term. Ø

TOTOTA: withdrawal of models Ø Several serious flaws in the models has significantly hurt Toyota’s image l Ø In the short term: l l l Ø in 2009, the company had to withdraw from the market 3. 8 million vehicles due to the acceleration system flaw it is estimated that due to defects and withdrawals Toyota models suffered losses of $ 3 billion in 2010 over the past year, throughout the world over 9 million vehicles have been withdrawn for consideration more than 30 lawsuits are waiting In the long term: l l current crisis has significantly hurt the reputation of the company competition has used well (Chrystler, Ford and Honda hasorganized the promotions, giving discount on a new car for customers who got rid of the old Toyota)

TOYOTA: the future Ø Car Sales in highly developed countries will fall and remain at low levels l l Ø majority of consumers’ demand is already satisfied relatively low economic growth The biggest outlays directed on emerging markets mainly Brazil, Russia, India, China (BRIC) countries l l l Toyota earlier than other companies in the sector began to invest in the development of appropriate infrastructure and brand awareness in the above countries in 2009 Toyota announced the beginning of motor vehicle production in India (the company Toyota Kirloskar) in 2010 Toyota plans to produce 100, 000 cars in the new factory opened in India

TOYOTA: trends and expectations (1) Ø Japan l investing in luxury brands (Lexus) • in 1990 10% of Japan's population was over 65 years, in 2006, the number suppose to double • older society saves more and raises the demand for more luxury goods Ø USA l collapse of the real estate market • strength of real estate market has always been related to car market because consumers often fund the purchase of car with a mortgage owed • stagnation in credit market will reduce demand for new cars l demand for green technologies • oil prices are rising, resulting in increased demand for cars Hybrid (Prius model) • in December of 2007. U. S. government passed a law requiring the car manufacturers to reduce the combustion of up to 35 mpg for cars, trucks and SUVs – Toyota, typically produces small, economical cars and its standards are already satisfy new requirements

TOYOTA: trends and expectations (2) Ø USA l hybrid legislation • USA introduces new law to encourage development of hybrid technologies • at present, when buying a car you can count on the hybrid tax relief of up to $ 3, 400, depending on the amount of car sales (the more cars the company sells the smaller the deduction ) – the aim is to support companies desiring to enter the market with hybrid technology Ø World Market l demand for cars will depend on the trend in oil, steel and aluminum prices

FORD/TOYOTA: general data (in $ mln)

TOYOTA: production (in 1000 s)

FORD/TOYOTA: sales (in 1000 s)

Risk factors

FORD Ø Ford is exposed to various kinds of risk not only to the market risk l l currency risk, commodity price changes, interest rate risk, financing risk, risk of extraordinary events are just some of the most important kinds of risk present risk of loss of liquidity: hedge against it by sale of receivables (securitization), issue of debt and bank loans insurable risks: the loss (damage) of property, civil liability – companies insure themselves privately they use derivatives to hedge – currency, interest rate or change in commodity prices risk – by forwards, swaps, options • does not use derivative to speculate

TOYOTA Ø Toyota is exposed to risks arising from: l l Ø Instruments used to protect: l l l Ø changes in exchange rates interest rates availability of materials changes in prices of materials forward contracts currency and interest rate options swaps Unfortunately, Toyota does not protect itself from price changes and changes in supply of materials l only protection is to maintain reserves of some materials

TOYOTA: currency risk Toyota settles its invoices in Japanese yen which increases its currency risk Ø Changes in exchange rates reflect very strongly on company results Ø l change in the dollar-yen exchange rate of 1% will change revenues by about $42 million Toyota protect itself from risk with the help of swaps and futures Ø Despite this, the company is unable to protect itself from a falling demand for exports of Japanese cars due to a change in exchange rates Ø

Ratio analysis

Liquidity ratios (1)

Liquidity ratios (2)

Debt ratio

Turnover ratios (1)

Turnover ratios (2)

Turnover ratios (3)

Profitability ratios (1)

Profitability ratios (2)

Profitability ratios (3)

Market value ratios (1)

Market value ratios (2)

Market value ratios (3)

Cash flow analysis

SWOT analysis

FORD

TOYOTA

Thank you for your attention