An analysis of their expenses show, despite similar spending patterns, GM’s resource management and financial planning strategy has resulted in the company releasing far more new and redesigned vehicles than Ford.
Although James Hackett spent the whole of last year strategizing on Ford Motor Co’s long-term self-driving car strategy, in his first week as the company’s CEO, his most immediate concern minimizing the skid in the company’s North American sales and protect the company’s market share from resurgent archrival General Motors Co.
As per two sources who track Detroit launches, Ford, the U.S. No. 2 auto manufacturer is caught in the midst of a product drought that shows no signs of easing until 2019.
Given the fact that the automobile industry has long product cycles, it isn’t clear what can Hackett do in the near term to get Ford out of its predicament, which, incidentally, can be traced back to decisions by its former CEOs.
Having being appointed at the helm of the company, Hackett has very little maneuverability since any product moves he makes now, will not have a market impact until 2021.
“Ford needs to move faster,” said Joseph Spak an auto analyst at RBC.
Michael Levine, Ford’s spokesman adept at answering questions, cleverly side-stepped observations raised on the company’s short-term product drought.
“We’re bullish on our strong pipeline of all-new cars, trucks and SUVs coming in the next five years. What’s more, the vehicles that we are launching … will continue to deliver high transaction prices and good business.”
In hindsight, during last decade’s auto crisis, it was smart on GM’s part, the No. 1 U.S. automaker, to have declared bankruptcy since it emerged essentially debt-free and so was able to spend on new products.
In comparison, Ford chose to not file for chapter 11 and instead borrowed heavily to survive, which left it short on cash and thus could not invest in new vehicles.
The disparity in the decision making process of these two companies are now evident. GM has not only surpassed Ford in pre-tax profit per vehicle in North America for the last two years in a row, it is now consolidating on those gains by rolling out new vehicles which are aimed at the heart of Ford’s vehicle lineup.
In the last 3 years, GM has sunk billions of dollars to overhaul many of its best-selling SUVs and trucks, including the Cadillac Escalade SUVs that dominate the sector and command a typical pre-tax margin on $20,000 or more.
GM has also boosted its share of the U.S. truck market with the 2014 launch of the mid-size Chevrolet Colorado and GMC Canyon pickups. In comparison, Ford’s all-new Ranger pickup truck is expected to debut only in early 2019.
The brilliance of GM’s strategy becomes apparent when you realise that both companies have roughly spent the same quantum, 8%-10% of their revenues, on research and development, equipment, and engineering.
In the last 3 years, GM has released far more newer and redesigned vehicles in the U.S. market than Ford.
“GM seems to be getting more for its money and realizing the results sooner,” said Joe Langley, an analyst with IHS Markit.