Corporate finance: Financial analysis of Ford and BMW

Résumé du document

This report will deal with the financial analisys of two main competitors of car market. Effectively, Ford and BMW (Bayerish Motoren Werke AG) are two important car manufacturers in the world. Even if they are competing on the same market, we can't say that these two manufacturers are directly in competition. In fact,the two firms are not targetting the same consumer. Ford is a popular brand contrary to BMW which is producing more exclusive cars of higher quality. BMW sells quite expensive cars contrary to Ford which has always produced low price cars. We can remember the fact that Ford was the first car manufacturer to process through mass production with the Ford "T" in 1913. This production process was a great invention which changed the industry world. Ford is present wordwide and is one of the most famous brand of the world. Ford has a very huge range of products because it proposes adapted products to the different markets. For example, Ford is selling pick-ups (long cars) in the US market which represent the main part of its sales. In Europe, Ford proposes small cars at low prices to attract people. Pick-up are not adapted to the European consumers. Ford's best sales in Europe are the "Fiesta" models, which are small cars with poor motors (contrary to the US market where people are fond of big motors, even if it is changing because of the rise of the petrol prices). Contrary to Ford, BMW hasn't any specific offer for different markets. BMW has a unique range of product. This range is quite wide because BMW has diversified its segment market since the end of the 90's. BMW has really grown during the 90's because of its attractive cars which are creating passion among the potential consumers. BMW is the favorite generalist brand of the world (cf: L'automobile Magazine's study). BMW has a great image of quality and sport. Thanks to this notoriety, BMW has become very successful and profitable, what has increased its offer.

Extraits

[...] General Motors is suffering from the same dificulties as Ford what can really worry the new Ford's C.E.O, Allan Mulally. To get out of its crisis, Ford will have to change its strategy to become again one of the world market leader. So, we can say good luck to Ford and congratulation to BMW's management! [...]

[...] By increasing the margin, Ford final prices will be increased what will directly decrease the sales. It would not be a good solution for Ford to increase the final price to get out of this financial crisis. Ford has to cut the costs to increase this ratio. return on assets = ( Net income + interests ) / average of assets = 1,2158 / 223,72945 = This ratio is very relevant to analyse the financial statements. Effectivelly, this ratio compares the net income with the assets already invested to measure the performance of the firm. [...]

[...] Concerning the efficiency ratios, the figures are another time better for Ford than for BMW. The asset turnover ratios are quite the same for the two competitors what mean that they are all the two very asset- intensive firms and that they are using the same level of their capacity prodcution. Figures about inventories are better for Ford than for BMW. Effectivelly, percentage of founds in inventories are higher for BMW than for Ford. However, such an important days'sales in inventory for BMW should not be unvoluntary. [...]

[...] At the beginning, Mini was owned by Austin and then by Rover. BMW decided to buy Rover. Very quikly, BMW decided to sell Rover because of the losses, but to keep the Mini liscence. Today, Rover has collapsed and Mini has become a great success. We can say that BMW has been very reactive contrary to Ford. BMW C.E.O has taken important decisions quickly contrary to the former Ford C.E.O. This is one of the main difference between Ford and BMW. [...]

[...] In addition, Ford wanted to take advantage of the great notoriety image of the English brand. Today, even if Ford has successed in constructing great Aston Martin without changing the brand notoriety, Aston Martin is still not profitable. Investments in research and development are representing too important costs to make the brand profitable. This is the first error of Ford. Secondly, during the same period where English car industry was in crisis, Ford decided to buy another English car manufacturer, Jaguar. [...]