Is Changan Ford the only choice for Ford?
In the past 2018, Ford’s Ringier factory ushered in a high-light moment of 100 years of construction; what is different is that Ford’s most important Chinese market swallowed a bitter performance in 2018.
By 2019, Ford still did not wake up from a nightmare. Joint ventures, global layoffs, and executives exchange blood. From the top three global car companies to the sixth, the Ford legend is still falling.
Internal and external troubles
Ford’s pay cuts and layoffs all prove its increasingly difficult to sustain business. And this plan has already started in 2017. Since the appointment of Ford CEO in May 2017, he has been emphasizing the improvement of Ford’s operations by cutting costs and simplifying car design and manufacturing. The goal is to reduce the cost of $25.5 billion by 2022.
On May 21, Ford Motor Company opened global layoffs and plans to cut about 7,000 paid positions, including the Chinese market. On May 20, Ford Motor Company CEO Jim Hanter said in an email to employees that the company will implement the final round of layoffs as part of the restructuring plan, which will be global worldwide by September. Cut 7,000 payroll jobs, about 10% of Ford’s paid jobs.
Ford intends to take this initiative to reduce bureaucracy within the company, achieve a flat management structure and cut costs. The e-mail indicates that North American workers will be notified on May 21, and most of them are expected to be completed by May 24, while restructuring in Europe, China, South America and other international markets is still continuing and is expected to be completed by the end of August.
The dilemma of internal and external troubles made Ford have to “cut the knife”. While eliminating internal worries, in the face of the desire to subvert the new entrants of the traditional auto industry and the increasingly fierce market competition, Ford chose to warm up with the old rivals in its foreign strategy.
At the North American Auto Show, which is hailed as the four auto show, German Volkswagen and Ford Motor Company of the United States finally ended their “warm” for nearly half a year. The official officials of the two sides declared “together”.
A number of cooperation agreements show that the two parties will jointly produce pickup trucks and vans and other commercial vehicles, and explore cooperation in the field of electric vehicles and automatic driving.
Specifically, Ford will be responsible for the development and production of medium-duty pickup trucks for both parties, and will be introduced to the market in 2022; while Ford will also be responsible for developing and producing large-size commercial vehicles for the European market, while Volkswagen is responsible for development and production. MPV models, and since 2023, significantly expand the business scale of both partners and improve operational efficiency.
At present, the cooperation between the two has made new progress. It is said that Volkswagen Group will invest 1.7 billion US dollars in Ford Motor Company’s auto driving department Argo AI.
This is undoubtedly enough to make Ford’s former CEO, Mark Fields, a heartbreaking ending. The reformer who was fascinated by autonomous driving and motorized applications was eventually “abandoned.” However, Han Kate, who announced that Ford’s focus on returning to the fuel truck business, had to compromise with the reshaping of the auto industry.
For today’s Ford, the old man is in the first place. Its disadvantages in the fields of new technology and new energy are infinitely magnified in the kinetic energy conversion market of policy, market and capital. And holding the masses, even the technology of sharing the public, is eager for Ford.
Today, new energy, autonomous driving, shared travel and other areas have become a new enthusiasm in the global automotive market. FCA merged with Renault, Toyota invested in fuel cells in China, and Daimler shared the trip with BMW and Geely.
Electrification and intelligence have gradually become the glue of car-enterprise cooperation.
After forming a global alliance with the public, Ford’s next move in the Chinese market is crucial. As Ford’s most important market, whether the Ford will hold hands with new partners after the joint venture is released may be an important condition for the future expansion of its business in China.
According to the 2018 financial report, Ford’s annual revenue was 160.338 billion US dollars, a slight increase of 2.3% year-on-year, but the net profit was only 3.677 billion US dollars, a sharp drop of 52.4% year-on-year. The bleak performance of the Chinese market is the primary factor in leading the performance of “waist”. According to the data, Ford China’s revenue in 2018 was 12.4 billion US dollars, a decrease of 1.7 billion US dollars compared with 2017.
Ford and the joint venture teammate Changan Automobile can be described as “honor and disgrace.” At the same time that Ford harvested bitter fruit, Changan Automobile also experienced the pain of losing its own leader.
According to the financial report, Changan Automobile’s revenue in the first quarter was 16.008 billion yuan, down 20% year-on-year; net profit loss was 2.096 billion yuan, down 250.62% year-on-year. Behind the slump in the performance of listed companies is the decline in sales of Changan Automobile. The data shows that Changan Automobile’s overall sales in the first quarter was only 448,800 units, a decrease of 210,000 units compared with 658,300 units in the first quarter of 2018.
Long-term dependence on joint venture brand profitability is a “common problem” for many Chinese car companies. However, Ford’s profit transfusion in Changan is far greater than other car companies. According to public information, 2017 Changan Ford contributed net profit of 80% of Changan Automobile’s overall net profit. In the same period, SAIC Volkswagen’s net profit accounted for only 39% of SAIC’s overall profit.
In 2019, Changan Ford sales still showed no signs of recovery. In the first quarter of this year, Changan Ford sold only 36,800 units, down 71.79% year-on-year.
Even so, Changan Ford’s inventory is still far ahead of each brand. According to the April Auto Dealer inventory data released by the China Automobile Dealers Association, 17 brands have a stock depth of more than two months. The Changan Automobile Dealer’s inventory factor has reached 3.4 months, making it the most invented brand among all brands. That is to say, Changan Ford can operate normally for 3.4 months when the dealer does not pick up the goods from the manufacturer. The inventory factor of the car dealers during the same period was 2.0.
Ford China’s former CEO Fu Lide has publicly stated that Changan Ford’s market competitiveness has declined due to the fact that some products are at the end of the previous generation’s product life cycle, but no new models have been launched, resulting in a sharp decline in sales. The lack of rationality of products is the main reason for Changan Automobile’s weak competitiveness in the market.
In view of this, at the “Ford China 2.0” conference in early April, Ford Motor China President and CEO Chen Anning announced the “Ford China Product 330 Program, which will launch more than 30 models for Chinese consumers in the next three years. New models of the Ford and Lincoln brands have been built; more than 10 of them are new energy vehicles, and the research and development of autonomous driving is increasing.
At the same time, executive exchanges are also taking place in Ford China. Since the beginning of this year, more than 30 foreign executives in Ford China have been reassigned to other regions, and local Chinese managers have taken over.
Can Ford, who is rehabilitated, be able to redeem himself in China and copy the 2011 Fox again, Mondeo in 2013? Is Changan Ford the only choice for Ford?