Volkswagen vs Ford
Introduction
Volkswagen and Ford are both family businesses working in the global automotive industry. In 2015 worldwide 73.9 million of passenger cars were sold in the global automobile markets along with the 86.56 cars produced. The biggest automotive markets can be found in China and in the United States. The biggest automotive suppliers in the industry are from Asia and Europe and include Bosch with steering systems, Continental in the area of tire manufacturing, Denso and Magna. The size of automotive supplier market worldwide is estimated at €620bn (The Statistics Portal, 2016). Those suppliers are currently faced with the new challenges and alternatives of the electric and cleaner and lighter car parts production with different materials in the light of greater environmental awareness. There are several leading passenger car manufacturers worldwide and in the year 2014 the greatest produced number of vehicles was seen by the companies Volkswagen, Toyota, Hyundai, G. M., Honda, Nissan, Ford, Suzuki, PSA, Renault, BMW, Fiat, Daimler AG, SAIC and Mazda. The Volkswagen is the leading passenger car producer and the Toyota has been the leading automobile manufacturer in the number of car sales (The Statistics Portal, 2014 and The Statistical Portal 2014a).
Volkswagen analysis
Volkswagen AG worldwide sale revenues were in 2015 213.292 billion euros, which is about 230 billion U.S. dollars and have been growing since the year 2010 onward. In 2010 the Volkswagen AG’s Sales Revenue were 126.875, in 2011 159.337, in 2012 192.676, in 2013 197.007 and in 2014 202.458 billion euros. The operating profit was also on the rise and was in 2014 at 12.697 billion euros. The company is number one in the world automotive market by the number of the worldwide vehicle production which reached in 2014 10.2 million. The company ranked second behind the Toyota in the motor vehicle manufacturers worldwide based on the global sales. The passenger cars revenue was in the fiscal year 2015 106.24 billion euros. The Volkswagen Group’s global market share as a production of passengers cars has in 2014 been at 13.55% and has been slightly increased, but has seen the decreased production in the global economic crisis that impacted all of the companies in the automotive industry. The most sold cars by brand were VW passenger cars, Audi, Porsche, MAN, ŠKODA and Scania. Audi and Volkswagen were on the 7 and 8 places in the year 2015 based on the most valuable brands within the automotive sector. The VW Golf/ Rabbit were the second best-selling car worldwide in the year 2015 with the 1.041.28 cars sold worldwide. The company has been very successful with the rising of its operating profits, which was in the fiscal year 2014 at 12.697 million euros. The biggest market of the company was made on the revenues in Europe (132.54 billion euros), following by North America (35.38 billion euros), Asia-Pacific (35.23 billion euros) and South America (10.15 billion euros) (The Statists Portal, 2016a).
Governance structure, strategy and ownership structure
The Group comprises twelve different brands from seven different countries in Europe and hence Volkswagen passenger cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial vehicles, Scania and MAN. The Group is also active in manufacturing large bore diesel engines, turbo engines, turbo machinery, compressors, chemical reactors, transition, wind turbines and others. The Group has 119 production plants in 20 different countries in Europe and 11 countries in the Americas, Asia and Africa. There are 610.076 employees worldwide, which products are being sold in 153 different countries in the globe. Business activities are composed of two divisions: Automotive and Financial Services division. All brands in the automotive division except the Volkswagen Commercial Vehicles and Volkswagen Passenger Cars are independent and separated companies. The automotive division comprises the Passenger cars Business Area and the Commercial Vehicles/ Power Engineering Business Area. The first division comprises the development of vehicles and engines, production and sales of passenger cars, trucks, light commercial vehicles, busses and motorcycles as well as other manufactured parts. The second division the Financial Service segment includes dealer and customer financing, banking, leasing, insurance activities, fleet management and mobility offerings. The strategy of the company is focused on improving their performance and to overcome the challenges exposed by the latest emission issue in the year 2015, which had a negative impact on the company. The strategy 2018 was launched in the year 2008 with the aims of implementing the intelligent innovations and technologies in order to guarantee the quality and success of the company. The goals were increasing the market share with decreasing the energy consumption, CO2 emissions, VOC emissions, disposable waste and fresh water consumption. Volkswagen AG and Volkswagen Group are led by the AG’s Board of Management in accordance to the rules set by the Supervisory Board. The Volkswagen AG Board of Management is responsible for managing the Group with accordance with the Volkswagen Articles of Association and the rules of procedures. Strategic management is conducted at the Group level by different committees composed of representatives of central departments, which are responsible for product planning, investment, liquidity, foreign currency and management issues. Each of 12 brands is managed by a Board of Management with the possibility of the independent development. The whole group targets are laid by the Board of Management of Volkswagen AG. They have established the corporate governance framework for supervision and management (Volkswagen Group, 2015). Shareholders are composed of the Porsche Automobile Holding SE- 52.2% of the voting rights, State of Lower Saxony 20% of the voting rights, Qatar Holding LLC – 17% of voting rights and other shareholders 10.8% of ordinary shares, The Porsche and Piech families control the majority of voting rights in the Volkswagen Group under the Porsche Automobile Holding SE (Volkswagen Group, 2015).
Ford analysis
Ford financial performance
Ford’s total revenue in the fiscal year 2015 was at 149.588 billion U.S. dollars and has been increasing in comparison to previous fiscal years where in 2012 the revenue was at 134 billion U.S. dollars. One of the biggest car manufacturers worldwide reported of total debt of the company in 2015 at 132.854 million U.S. dollars, which has been growing from the year 2011 onward. The deficit was in the year 2015 at $28.657 million U.S. dollars. The company has sold 3.230.842 vehicles worldwide and the number has been growing compared to the previous years. The Ford’s global market share, based on the car production was in 2016 at 4.48%. There has been some up and downs since in the year prior the crisis the Ford’s market share was bigger and reached almost 7.8% in 2003 and was at 4.5% in 2014. One of the brands Ford Focus was in 2015 the fourth best-selling car model worldwide with the 826.22 thousand cars sold. The competition on the American market is seen by the GM, Toyota and Chrysler (The Statics Portal, 2016b). The biggest percentage of the Ford’s revenue can be found in the American market for 66% of the company’s revenues are made in Americas and only around 25% and the smallest part in the Asia Pacific 2.44% (Reuters, 2016). The Ford’s revenue in the U.S. was in 2015 at $93.14 billion and in the same year the company generated around 7 billion in revenue from Germany segment. The brand value of Ford has been at $13.106 million. Ford brand was ranked in 2015 on the fifth place based on the most valuable brands within the automotive sector worldwide behind the Toyota, BMW, Mercedes-Benz and Honda (The Statistical Portal 2016b).
Ford governance structure, strategy and ownership structure
The structure of the company is divided onto the Automotive and Financial Services and further into the business units and regions. Inside the Automotive sector, there are different regions referred as segments and hence North America, South America, Europe, Middle East & Africa and Asia Pacific. The total number of employed by entities was at the end of the year 2014 187 thousand. They include the sales of vehicles, service and parts along with the distribution, manufacturing and development. The second business sector is composed of Ford credit with financing and leasing and other financial services such as holding companies and real estate activities. Inside the company there are 16 different Directors on the Board of Directors, which are responsible to take care of the stakeholder interests, by which they are annually elected and responsible. The company has a Corporate Governance Principles which were adopted by the Board of Directors and can be found in company charter of the different Committees such as Audit, Compensation, Sustainability, Finance, Nominating Committee and Committee of the Board which all form the framework for the company governance. The board of Directors is responsible for the CEO and management oversight. The strategy of the company is therefore Corporate Governance with emphasizing the shareholders’ interest. There are separate roles of the CEO and Chairman of Board. As of the year 2015 the Ford had 3.885.089.749 shares of Common Stock and 70.852.076 shares of Class B Stock. Class A and class B shares means that class A is for outsiders and the Class B is for the Ford family and when the stock are sold by the family members they become a Class A. From this it is seen that the stock holders control around 60% of the company and the Ford family around 40% even though it holds fewer shares. The biggest shareholders are the Vanguard Group Inc. with 5.82%, Evercore Trust Company 5.58%, SSgA Funds Management Inc. 3.89%, BlackRock Funds Advisory – 3.77% and others (Ford Motor Company, 2014).
Challenges in both companies
The automotive sector is highly dependent on the overall economic conditions on which single companies do not have specific control and effect on. This is seen from the global crisis, which negatively impacted both companies as well as others in the automotive sector. Diluting shares and the risks around continuous ownership of the business the company will lose the business. Both companies are one of the most successful ones. The Ford family has made a Ford Foundation with which it arranged for the family members have constant control over the Ford Motor Company indefinitely. They have also created the two stock classes which were given to the foundation which are takeover by the heirs of the Ford family. When the company went public, the family onwards possesses the 40% of the voting power as long as it owns 60.7 million shares of stock Class B (Carlock & Ward, 2001). The Volkswagen Group ownership structure is connected with the various family members of the Porsche Company, which is the biggest shareholder in the Group. The Porsche and Piech family own half of shares via the Porsche Holding in the company with the majority and hence 52% of the voting rights of VW (Independent, 2015). With both family business, there is a chance that the transferring the stokeholds to the next generations will not happen, because there exists the chance that the business will not survive as has been pointed out that the majority of the family companies do not survive more than three generations. But there are exceptions. There are vast challenges ahead of both companies, such as successful management and running, but the next generation of both families will likely be very successful in implementing the strong governance, ownership structure with sufficient capital for growth and with the professional management.
Market capitalization which can also be seen as the indicator of the public opinion of the company has shown the decrease in case of Volkswagen with the latest emission issues and slight increase in the Ford Company in the last five years. The Ford Motor market capitalization trend is showing the increasing trend with slightly volatile. Both companies faced severe challenges in the global economic crisis in 2007 and 2008 where the market cap has reached the lowest point in the last years. The Volkswagen Group market cap was in the year 2015 $126 billion and the Fords $65 billion. The Volkswagen Group faced severe challenges in the year 2015 which resulted also in the decrease of the market cap (Volkswagen Group, 2014 and Ford Motor Company, 2014). Both companies are faced with the overall automotive challenges of producing more improved vehicles and products with highest quality along with more environmentally friendly products and services. The strategic directions of both companies are focused on expansion on the foreign markets. Ford has in recent past lost great shares on the European market, which directions are pointed towards improving the situation. The same can be said for the Volkswagen which main market is Europe and is aimed at greater sales also in other markets outside the continent. The directions are headed towards better quality and innovations.
Evaluation
German and American companies are one of the most successful ones in the automotive markets. They have encountered various different problems which make the current position of the companies not the best option to go forward. The Volkswagen Group has seen vast critics and negative publication with their emission scandal, which affected the traditional brand all over the world and resulted in the structural changes along the main responsible personnel and in the lost revenues and decreased public trust in the brand along with the downsizing the value of the company stocks. The company has been regarded as one of the most environmental friendly one, which has proved to be cheating. This has left the historical marks with the perception of diesel vehicles as unclean. On the other hand, there is Ford which has been a traditional American family company still ranking among the four most successful automotive companies, but has been losing its market shares. The Ford reputation has not been damaged and can implement innovation that would increase their market shares. They have both long tradition and are one of the strongest companies on European and American ground and can therefore improve their performance in sales, revenues and market shares.
Conclusion and recommendations
Both automotive companies have some similarities and some difference. There are some recommendations for both, which as Volkswagen and Ford had already made to invest in the innovative industry and technology, which aims at less pollution in the light of the global climate change and environmental awareness. There are heavy initial investments needed, but one of the most successful automotive companies should take the responsibility to protect the environmental sustainability. Both companies should refrain from the disinformation of the public and to promote the traditional brands that are regarded as one of the best in the world. Especial Volkswagen needs to work on its reputation in order to prevent further economic loss. Both can improve their market shares with the right management, strategy and policy.
Work cited
Carlock, S. Randel & John L. Ward. (2001).Strategic Planning for the Family Business: Parallel Planning to Unify the Family and Business. Palgrave: Great Britain.
Ford Motor Company. (2014). Delivering Profitable Growth for All: Ford Motor Company 2014 Annual Report. Retrieved from http://corporate.ford.com/annual-reports/annual- report-2014/files/201_Ford_Annual_Report_sm.pdf
Independent. (2015). Germany Can Teach us a Thing or Two about Good Family Business. Retrieved from http://www.independent.co.uk/voices/comment/germany-can-teach-us- a-thing-or-two-about-good-family-businesses-a6668586.html
Reuters. (2016). Ford Motor Co (F. N.). Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=F.N
The Statistics Portal. (2014). Leading Passenger Car Manufactures Worldwide in 2014, Based on Production. Retrieved from http://www.statista.com/statistics/198524/15-leading- passenger-car-manufacturers-worldwide/
The Statistics Portal. (2014a). The Leading Global Automotive Suppliers in 2014, Based on Revenue. Retrieved from http://www.statista.com/statistics/199703/10-leading-global- automotive-original-equipment-suppliers/
The Statistics Portal. (2016). Statistics and Facts About the Global Automotive Industry. Retrieved from http://www.statista.com/topics/1487/automotive-industry/
The Statistics Portal. (2016a). Facts on Volkswagen. Retrieved from http://www.statista.com/topics/1574/volkswagen/
The Statistical Portal. (2016b). Statistics and Facts About Ford. Retrieved from http://www.statista.com/topics/1886/ford/
Volkswagen Group. (2015). Volkswagen Moving People: Annual Report 2015. Retrieved from http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2016/04/Y _2015_e.bin.html/binarystorageitem/file/Y_2015_e.pdf
