Top line vs. bottom line
In many ways Ford and rival GM represent a yin-yang relationship, where one’s strength represents its rival’s weakness. GM still ranks atop the U.S. in sales, and competes with Toyota globally for the sales lead creating its strength in top-line revenues. On the other side, Ford has its strength in consolidating platforms and streamlining production to create strong margins and profits – strengthening its bottom-line profits. That’s where I believe Ford Motor Company (NYSE:F) has won the game thus far, and should continue to do so.
In 2006, when Alan Mulally was introduced as CEO, the launch of his “One Ford” plan emphasized a few key strategies right off the bat. One of those strategies was streamlining global platforms. No longer would Ford Motor Company (NYSE:F) have different platforms for similar vehicles in various markets around the world – a huge operating cost.
To explain a little better, consider that Ford Motor Company (NYSE:F)’s “C” platform produces two very different vehicles that can be produced with many of the same basic parts on the same assembly line. Two of the vehicles on the “C” platform are the Focus compact and the Escape SUV. Creating both of those different vehicles using some of the same essential parts creates economies of scale and increases profitability per vehicle.
Taking a step back and looking at the big picture, consider that Ford had 27 platforms in 2007, but by next year that number will be reduced to 14. Ultimately it will be down to as few as nine core platforms, giving Ford a unique ability to create many different vehicles and focus on improving the quality of the parts used.