Reasons for Ford to decline

Ford, have been on decline due to many reasons, such as, discount reliance,
mismanagement, the burden of union pensions, a lingering quality gap with the Japanese
automakers, and the strength of Toyota and Honda in the U.S. market.
Ford also faces new competition from the South Korean automakers, which were barely a
dot on the horizon a decade ago.

One major reason for Ford failure was its Detroit system, mass production who replaced
craft workers with assembly line. The threat arrived in early 1980s, when foreign firms,
such as Honda and Toyota started mass production in American soil. Compared to
American way of working, which is always on grand scale, the Japanese automakers had
a different outlook.

For example, Ford assumed that profit should equally be distributed among the entire
workforce. The companies also had union leaders who negotiated pension and other
benefits with management, which worked well for decades and it was assumed that this
system would work eternally, which was far from being a right approach in changing
times. Toyota on the other hand had a different way of working. The company did not
share every penny among its workers like Ford did. Instead it offered premiums to
workers. They believed that it was unrealistic to promise benefits of future that were not
certain. Thus instead of paying pension, they made payment on the basis of contribution
being made during work, which did not put any burden on their financial system. On the
other hand, Ford had to pay benefits and compensation, even when they were in decline
and workers were also no longer contributing any thing which added to their woes. This
led to crippling pension costs and overburdening the Ford automakers.

Another problem since 2001 has been auto parts supplier pressure, which is coming from
China. Even though the local industries are able to manage the pressure from suppliers
from China, but the impact of it is enormous. However the US automakers have to
develop new strategies to fight back the Chinese. The reason is that foreseeable future
automotive demand. A lot of Japanese companies are setting up their companies in the
developing world to meet the demand in China, India, South America and Southeast
Asia. The US auto companies are even late in these markets. Ford has some plants in
China and other Southeast Asia countries, and GM has also pledged to develop $130
million parts factor in Shanghai, however it is much lower to meet the expectations of the
demand. Japanese have made huge investment, such a Honda assembly plant in Thailand
and Indonesia and Pakistan.

The problem with Ford and other local US companies is its size, history and total share of
the market without any rival. The US automakers have dominated the US market for
almost a century without a single rival, during which they little changed and whatever
they made was sold. Consumer had to buy from them, as they had no alternative.
However over time, this trend changed and American market became a battlefield, where
US automakers were faithfully practicing their old dogmas. Japanese companies changed

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the scenario, they are not only highly competitive, but also have a very high standard and
were able to maintain quality and consumer expectations. US automakers were used to
selling whatever they made, without paying any consideration to maintain quality and
defects which could not work in changing environment. The Japanese companies worked
as teams, while American companies worked as rivals. In Japanese companies team
members offer corporation, while in American division system, it led to rivalry and
internal wrangling, and management did little to change this internal politics. Thus we
can say it was not just one factor, but combination of factors, which led to the decline of
Ford in the US auto industry.

In 1957 Ford introduced its Edsel as the car of the century but it turned into a financial
disaster for the company, because by that time, the public’s interest in huge, big fin cars
with glitzy chrome was just about over. The public thought there was something radically
new coming out. But it was really just another 1958 car. It had more gizmos and gadgets
on it but it wasn’t anything that lived up to the hype. Due to this event, customer’s lost
confidence in Ford and it turned in to a disaster.

The failure of their current management to plan for the long term was another reason.
Individually and collectively, Ford has the worst set of managers that any American
owned and operated heavy industry has ever had. It was because of these small minded
imperial managers and their bloated size and profits that all costs were passed on to the
consumers. Moreover, all fuel saving innovations was stifled and discouraged unless they
added to bottom line profit. Financial engineering, even of currency fluctuations, for
example at Ford, was simply ignored by citing ‘profit center’ nonsense as a reason to
ignore currency fluctuations.
Foreign carmakers coming to America were ignored as too backward and too ignorant to
learn how to make 'cars like ours' or to 'understand the US market.' In this way first the
Japanese, then the Germans and Koreans were ignored. And later on, the Japanese
automakers staked their claim to the U.S. market by delivering high-quality, reasonably
priced and fuel-efficient passenger cars.