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    Case_01_C03_Ford.doc Case_01_C03_Ford.doc Document Transcript

    • Ford and Mazda Share the Driver’s Seat Ford Motor Company and Mazda Motor Corporation have one of the more unusual working relationships in the automobile industry. Ford is a major U.S. firm; Mazda is based in Japan. The two have collaborated on several different projects, and each agrees that the partnership has paid off handsomely. It all started in 1979. Mazda, a relatively small player in the world automobile market at the time, wanted a strong international partner in order to make the transformation from a small niche player to a major global automaker. At the same time, Ford was looking for a foreign partner to help it design and produce smaller automobiles. The two firms agreed that they were logical partners. Mazda sold approximately 25% of its stock to Ford, and the two firms have collaborated on various projects since. One significant success story involves the Ford Probe and the Mazda MX-6. Mazda engineers designed the basic platform, engine, and drive train for the cars. Mazda then designed the outside for the MX-6, and Ford did the same for the Probe. Finally, both cars are assembled at a factory in Flat Rock, Michigan, which is owned by the two firms. Thus consumers who buy a Ford Probe or a Mazda MX-6 are getting essentially the same car but with a different appearance. Another successful collaboration between Ford and Mazda has been the Ford Escort. Again, Mazda engineers design the car, and Ford makes it. With the Escort, however, Mazda's involvement started at the very beginning of the process, and the Japanese firm played the dominant role in establishing a detailed schedule for getting the car into production. Engineers in U.S. firms like Ford have a reputation for continually raising problems and issues during design that result in delays and extensions. Mazda, however, refused to bow to scheduling delays and kept everyone focused on moving ahead and staying on schedule. As a result, the first new Escorts rolled off a Ford assembly line almost to the day of the production target - a target that had been set seven years earlier! Further, the Escort came in under budget and with higher EPA gas mileage estimates than had been projected at the start of the project. Managers at Ford estimated Mazda's contributions saved the firm over $1 billion on design and production. There have been some rough spots in the alliance, however. The popular Mazda Navaho recreational vehicle, launched in 1990, was actually made by Ford, based on the popular Ford Explorer. Unfortunately, for Mazda, however, Ford announced in 1994 that demand for its Explorer was so great that it would soon cease providing Navahos for its Japanese partner. More importantly, Mazda fell into severe financial difficulties in the mid-1990s due to over expansion of capacity, costly proliferation of its vehicle models, and a recession in its home market. To restore Mazda's financial health, its chief creditor, Sumitomo Bank Ltd., has given effective management control of Mazda to Ford. Ford now manages the Flat Rock plant - after sending 320 Mazda executives back home to Japan - and has changed the name of Mazda's chain of Japanese dealerships from Autorama to Ford. To conserve cash, Ford executives also canceled Mazda's plans to start manufacturing in Europe. Instead, Mazda's European dealers will focus on marketing
    • imports from Mazda's Japanese plants and Ford - made products sold under the Mazda nameplate. Source: Adapted from R.W. Griffin and M.W. Pustay, International Business (Reading, MA:Addison-Wesley, 1996), pp.437-438. Question One: Is the arrangement between Ford and Mazda a joint venture rather than a more general strategic alliance? Why or why not? The arrangement between Ford and Mazda is more of a strategic alliance, because both companies have maintained their strategic missions by going into business together. This fact can be proven by the words of James E. Miller, the President of Mazda Motor Corporation, who on April 8, 1999 said, “The equity relationship between Mazda and Ford began nearly 20 years ago. Our actual business relationship began 28 years ago. While the two companies intend for the identities of each company to remain very separate and unique, we also work every day to further strengthen our strategic cooperation.” http://www.e.mazda.co.jp/Publicity/Public/9904/990408ed.html The arrangement between Ford and Mazda is a strategic alliance rather than a joint venture. A joint venture usually consists of one company branching out in an effort to diversify their corporation. In contrast, a strategic alliance involves the achievement of common objectives in one particular issue. In this case, strategic alliance occurs since Ford and Mazda share the ownership of the operation on an equity basis, financial responsibilities, designing, manufacturing and engineering Ford Probe and Mazda MX-6. “Mazda, a relatively small player in the world automobile market at the time, wanted a strong international partner in order to make the transformation… at the same time, Ford was looking for a foreign partner to help design and produce smaller automobiles.” The arrangement between Ford and Mazda is a strategic alliance rather than a joint venture. They are agreeing to more than just working on a project together. Ford bought 25% of Mazda’s stock and they have collaborated on several projects. Question Two: What fundamental questions might managers at Ford and Mazda have asked themselves before becoming strategic allies? Are the two companies corporate cultures compatible? Will the alliance be profitable for both companies? What about in the long term? Will the companies be beneficial to each other in the future? Will our company lose its identity? How does this alliance affect the company’s pre-established name?
    • Establish financial management and geographic guidelines Set a target date to review and decide on whether to continue the alliance Evaluate Critical Success Factors Question Three: What are the apparent benefits that each firm derives from this relationship? Mazda got a strong international partner Ford saved over $1 billion on design and production of Ford Escort When Mazda fell into financial trouble, Ford was there to help out Ford got a foreign partner to help the company design and produce smaller cars Both companies attracted new markets/segments Ford gained new OM skills Mazda entered the U.S. market by using the already established distribution systems of Ford manufacturers. Question Four: What might eventually cause Ford and Mazda to dissolve their alliance? Both companies want to expand into the others market. When Mazda had developed a strong global standing and Ford has gathered its share of the foreign market. Both companies (or one company) may accomplish their goals and the partnership could be dissolved. Money problems. Loss of goodwill between the companies. Issues of control in either company. Either company becoming so successful that no further alliance is needed. Ford may leave once they have learned everything from Mazda.
    • Question Five: Why don’t more automakers follow the lead of Ford and Mazda and enter partnerships for design and manufacturing? More automakers are following the lead of Ford and Mazda. Some examples include: Chrysler Corporation and Daimler Benz-AG, which formed the fifth largest world auto maker in October 98; and Nissan-Renault Alliance formed on March 27, 1999.) Actually there are a number of automakers that have entered partnerships that have proven to be beneficial plans. For example, Chrysler and Mitsubishi Differences in management style, corporate cultures and work ethics. Historically, very few of these alliances have worked out. Either may be reluctant to share ideas with others for fear of giving up secrets. Differences in management style, missions. Conflicts, legal issues, and monetary issues It is easier to hire away the other companies’ top executives. Question Six: Will Mazda’s recent financial problems—and Ford’s reaction to them— cause their 14-year-old alliance to break up? The big question is can (or will) Ford with their strong international name and financial standing continue to pull Mazda out of financial crisis. Mazda needs Ford for financial strength. Ford does not need Mazda any longer.