Chapter II - Literature Review
Section I – Literature Search
In this paper, the author hypothesized that one of the major causes of Ford Motors’ demise, in terms of organizational performance, is its inability to address the causes of its product recalls, which consequently led to significant financial setbacks and brand and image deterioration.
The recalls of Ford previous products affected its short – term performances and damaged its image, determining prospect customers to shift their focus from Ford to other automobile brands. Nevertheless, the company continuously strives to improve its image, enhance its effectiveness and satisfy customers, through its strategic growth plan (Fleming, 2010).
Committed to its fiduciary duty of creating safe cars, Ford recalls automobiles that have minor quality issues, although they would not directly jeopardize drivers, passengers or other participants in the traffic. Shepardson (2015) notes that Ford recalled 2003 – 2005 Crown Victoria Mercury Grand Marquis cars to change the lighting control module, whose module solder joints could crack, stopping the power lights and causing a potential accident risk during nighttime. Earlier this year. the company announced that it is recalling 391.000 Ranger pickup from 2004 – 2006 United States and Canada for repairing the driver’s air bag inflators, which can produce injuries because it can explode heavily (CNBC, 2016).
In order to address the recall problems that affected its performances in the recent years, Ford applied considerable improvements in engineering and has developed a safety leadership guideline (Fleming, 2010). Faced with quality control problems, Ford analyzed the customers’ major complaints and created Six Sigma projects in response, increasing the customer satisfaction by reducing the defects and reducing the deficiencies by providing continual analysis and improvement (Powell, Neely & Sawayda, 2014).
Ford adopts a strategy of admitting its previous mistakes and correcting deficiencies that could pose a risk for traffic, through its recalls. However, some are skeptical about the efficiency of the recall process. Exemplifying a Ford recall case since 2000, which took seven years from the first report to the final recall decision, Ahsan (2013) states that companies can pose a great danger for traffic, resulting in a negative image for them.
Nevertheless, Ford continues to optimize its growth by maximizing its safety leadership strategy, which is intended to improve the company’s image (Ford, 2008). The aim of this strategy is to demonstrate that Ford is a responsible automaker, who produces safe cars and periodically reviews its safety and performance criteria, enhancing like this its reputation and determining consumers to purchase Ford vehicles (Ford, 2008).
Section II – Comparative Analysis
Product recall is not specific to the automobile industry, although many automakers have faced quality issues and had to recall their vehicles. Two of Ford’s main competitors, Toyota and General Motors also have a history with product recall (Ahsan, 2013; Michaels, 2014). The researches show that the recall approach is increasing among the automakers, which indicates an increasing concern for passenger safety, or a constant strategy to improve the harmed organizational image.
Toyota’s unintended acceleration deficiency (2009 - 2011) harmed the organization’s reputation, with customers doubting the “Toyota Way” on product quality (Koopman, 2014; Liker, 2004). Other similar cases signed by Toyota include the recall of 4.2 million vehicles in United States due to inappropriate floor mats that could trap the accelerator pedals, 2.9 million Toyota cars in U.S. for faulty Takata airbag or 7.4 million automobiles for window switch problems (Ahsan, 2013; Chew, 2015).
In General Motor’s case, there has also been registered recall cases, such as the 2014 recall of is small vehicles, caused by the detection of faulty ignition switches (Shaout & Dusute, 2014). Like in Ford Pinto case, where the automaker was blamed of knowing the life threatening problem of its vehicles, but hid it until it was forced to acknowledge it by the multiple accidents caused by that car, GM is accused of the same approach (Hoffman, 1982; Michaels, 2014).
The product legal has affected both Toyota and General Motors. With a long – standing tradition for product safety and superior quality, Toyota entered the 21st century with a series of quality products that affected its performance, registering a 16% sales fall in January 2010, after the 2009 massive recall (Bowen & Kennedy, 2010). Besides the sales drop registered by General Motors in 2014, the company was also found guilty for concealing the deadly ignition key defect, for which it supported a plea deal of $900 million with the U.S. government (Hennelly, 2015). Nevertheless, Ford is the industry leader in product recall, calling back automobiles for less serious issues than Ford Pinto or other vehicles that resulted in human deaths, in order to eliminate the risk of accident by timely spotting potential deficiencies (Ahsen, 2013; Ford, 2008).
The main solution for Ford Motors in this case is to learn from its competitors’ and own mistakes in terms of conducting product recalls. The key takeaway that the company should absorb is that product recalls are costly and so they have to take the time working with their engineering department first before releasing a product so that no product recalls would be necessary in the first place.
Section III – Summary
This chapter presented Ford’s strategy for enhancing its performances by increasing its credibility. With the elaborated product recall strategy, Ford is admitting its errors and is confirming that it does not intend to hide any safety hazardous defects that might jeopardize people’s life. Having the safety of periodical improvements on its safety procedures, customers will be drawn to Ford, hence, boosting its performances. On the other hand, the same strategy is approached by its rivals, especially by Toyota, who intends to regain its safety reputation. On a long – term, the recall strategy will prove successful for Ford’s performance, overpassing rivals like GM or other automakers who make – up deficiencies instead of managing them on a timely basis. Nevertheless, Ford also needs to improve its recall decisions in order to reduce accident risks, contributing to its increased performances due to a responsible business attitude.
References
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Bowen, R.M. & Kennedy, J.J. (2010) Accounting for Toyota’s recalls. Washington: Foster School of Business.
Chew, J. (2015) here’s why Toyota just recalled 6.5 million cars. Retrieved from http://fortune.com/2015/10/21/toyota-recall-window-6-million/.
CNBC (2016) Ford recalls 391k pickups due to air bag death. Retrieved from http://www.cnbc.com/2016/01/26/ford-recalls-391k-pickups-due-to-air-bag-death.html.
Fleming, J. (2010) Ford. One profitable growth. Retrieved from http://ophelia.sdsu.edu:8080/ford/06-05-2011/doc/ir_20101210_goldman_sachs_global_auto_conf.pdf.
Ford (2008) Ford Motor Company business plan. Wall Street Journal. Retrieved from http://www.wsj.com/public/resources/documents/Ford_Motor_Company_Business_Plan122008.pdf.
Hennelly, R. (2015) Has General Motors learned its $900 million lesson? Retrieved from http://www.cbsnews.com/news/has-general-motors-learned-its-lesson/.
Hoffman, W.M (1982). Case Study. The Ford Pinto. Corporate obligations and responsibilities: Everything old is new again. Retrieved from http://www.ridgepoinths.com/wp-content/uploads/2012/08/Pinto-Case1.pdf.
Koopman, P. (2014) A case study of Toyota unintended acceleration and software safety. Pennsylvania: Carnegie Mellon University.
Liker, J.K. (2004) The Toyota Way. Tata McGraw Hill.
Michaels, J. (2014) GM’s delayed recall a moral failure. Retrieved from http://thecooperfirm.com/wp-content/uploads/2013/11/00065120.pdf.
Powell, E., Neely, C. & Sawayda, J. (2014) Ford Motor Company manages ethics and social responsibility: New Mexico: University of new Mexico.
Shaout, A. & Dusute, C. (2014) Where did General Motors go wrong with the ignition switch recall? IIUM Engineering Journal. Vol. 1, no. 2, pp. 13 – 21.
Shepardson, D. (2015) Ford recalls 313.000 cars for lighting failures. Retrieved from http://www.autonews.com/article/20151222/OEM11/151229975/ford-recalls-313000-cars-for-lighting-failures.
