This paper highlights, the large scale labor surplus at Ford is due to the macroeconomic environment during the time when the financial crisis struck the economy beginning in the last quarter of 2007. Almost all of the company undergo fiscal hardship including Ford…
From this paper it is clear that in the case of Ford, it was tougher because it was faced with two pronged issue, first is the harsh macroeconomic environment wrought by the financial crisis, second is the aggravation of competition that compelled auto companies to streamline their operations to remain competitive. In Ford’s case, their market share declined from 26% in the 1990s to a mere 14.8% in 2007. During the crisis, demand for high ticket items declined of which auto industry were among the worst hit and this resulted to the large-scale labor surplus at Ford because the demand significantly declined. During the precipitous decline of demand, Ford has to cut its production to avoid waste with the same manpower it had when it was operating in full capacity. Also, the decline in demand resulted in decline in sales that could no longer sustain its overheads in manpower. Ford has decided to pursue employee buyouts and attrition in an attempt to shrink its workforce to match its productivity demands. Why do you think Ford is using these two tactics? Do you think these are the best options for Ford to achieve its goals? Ford has to use this tactics because the demand declined. This is evident with their shrinking market share of a mere 14.8% from a 26% in the 1990s. They just cannot maintain the same overhead cost in terms of manpower when sales is declining. This is evident with their losses of $12.6 billion in 2006 and $2.7 billion in 2007. If they will not cut down their manpower according to the manpower requirement of the demand, loses will continue and it will not be long before Ford will get bankrupt. If that happens, Ford will instead have to let go all of its employees. ...
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