IN MY OPINION: Institute of Management companion Nick Scheele, Ford of Europe's chairman, explains how the company remodelled itself and re-engaged with the consumer

IN MY OPINION: Institute of Management companion Nick Scheele, Ford of Europe's chairman, explains how the company remodelled itself and re-engaged with the consumer - The automotive industry is among the most competitive of global businesses and nowhere

by NICK SHEELE, Ford of Europe's chairman
Last Updated: 31 Aug 2010

The automotive industry is among the most competitive of global businesses and nowhere more so than in Europe, where stable volume levels, an increasingly varied range of products and better-informed and demanding consumers have given the industry its toughest-ever challenge.

The industry used to be highly confident, perhaps arrogant. But a dramatic change has taken place in recent years. With tremendous advances, particularly through the internet, customers are more sophisticated and aware than ever. It is they who now hold the initiative. In today's ultra-competitive market the consumer unquestionably rules.

So this year we developed an action plan crucial for our future ability to compete - Ford's European Transformation Strategy. A two-pronged programme, it addressed key structural and cost issues within the organisation and stimulated revenue generation through a re-engagement with our customers.

In 1999, with five major assembly facilities producing passenger cars in Europe, Ford of Europe had the capacity to build 2.2 million vehicles.

But we sold only 1.65 million and, even with the most optimistic projections, we could not expect to sell more than two million vehicles a year. We concluded that, with the equivalent of one plant too many, we had to focus on cost and asset utilisation. This meant a more efficient use of remaining facilities and the elimination of excess capacity.

The decisions were tough and I personally found some of them very difficult.

I grew up in the Brentwood community - the Ford heartland - and joined the company straight from university, so I have deep roots in the Ford tradition. But the decisions had to be taken and by early 2002 we will have achieved an overall capacity reduction to 1.8 million vehicles.

Finding the way to resolve a significant shortcoming in diesel engine availability was also vital and so we are investing dollars 600 million to refocus our Dagenham facility as Ford's global centre of excellence for diesel engineering. It will continue to be a major source of employment (we will remain the largest industrial employer in Greater London) and a major element in our global structure.

There is no scope in this highly competitive environment to achieve increased profit through pricing, so cost reductions have to be made. We have therefore set ourselves an ambitious but achievable dollars 1 billion cost-savings target within the next five years.

The second element of our plan was revenue generation. Ford of Europe would admit to having missed certain trends and niche developments. We were slow in reacting to the huge growth in diesel demand, for instance, and failed to anticipate the rapid emergence of a small multi-activity vehicle segment. We were out of touch with our market. Now though, we have faced up to some fundamentals. We are re-engaging with the consumer at a product and brand level, we have an aggressive launch programme for new and desirable products and we are sizing our business to reflect capacity issues and forward projections. A broader product range is the best demonstration of our declared corporate DNA - dependable and contemporary products with driving quality. The proof of the pudding, if you like, is in the eating.

We must also be totally accessible to our customers. Here Ford has been quicker than most to spot the potential of the internet as a prime communications medium. It offers endless business opportunities for both backroom and frontroom functions and will allow constant multi-directional information and data-flow. Our transformation strategy in Europe is about reaching out to the consumer, and the lead we have taken in e-business demonstrates a determination to achieve it.

With a sound cost base and accelerated new-product plans in place, the internet holds the key to our future success. We have already developed a number of customer-focused initiatives, such as Ford Journey, and we are partnering some of our major competitors to develop Covisint, which represents a leap forward in the global supplier-manufacturer relationship, bringing consumer benefits such as reduced delivery time, raised quality and competitive pricing. Linking the consumer to production may be next.

The internet has introduced a new era of direct communication, providing a range of previously unimagined capabilities. We want our whole team to understand how the web works and why we are driving forward so many e-commerce actions. We are providing every employee with a computer and internet access at home to broaden their understanding. They are, after all, our most critical customers as well.

Companies stand or fall by their commitment to the consumer. Ford of Europe has suffered in the past five years because it turned inwards and stopped looking at the market, the consumers and their needs. It lost touch and important trends were missed. We believe we have reacted in time to turn our situation around, to capitalise on lessons learned and to become once more the strong force we believe Ford in Europe can be - part of the world's leading company providing automotive products and services.

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