Growth through shrinkage
The idea in business is always bigger is better. The bigger the company, the larger the profits. That seems to be the mantra for companies that want to keep growing.
Obviously, you can’t keep growing a company, and its profits, by staying the same or shrinking. Not so fast, there is one company that thinks it can do just that: Ford Motor Co.
By all accounts, even after unveiling a $12.7 billion loss in 2006, Ford’s new Chief Executive and President Alan Mulally remains confident the company’s plan to reduce capacity and plow cash into building new models will rebuild the company and return it to profitability. Those plans will about with the help of $25 billion in newly obtained credit that mortgaged the company’s future.
The plan is to become more profitable by 2009 by reducing the workforce by 33%. Ford will cut 44,000 workers and close 16 plants. Mulally said if there are fewer people, there is a greater chance to increase profitability even if market share drops.
As long as Mulally is at the helm, it seems like he will remain committed to his plan. “It is very analogous to flying because you’ve got to know where you’re going and you’ve got to know where you are so you can take corrective action to get back on that plan,” he said.
Ford’s not alone in trying to get themselves out of the economic quagmire called the North American auto industry. GM and DaimlerChrysler have to get their financial and business planning acts together to get them through their various dramas.
Can a business grow by shrinking?
Talk to me.
Obviously, you can’t keep growing a company, and its profits, by staying the same or shrinking. Not so fast, there is one company that thinks it can do just that: Ford Motor Co.
By all accounts, even after unveiling a $12.7 billion loss in 2006, Ford’s new Chief Executive and President Alan Mulally remains confident the company’s plan to reduce capacity and plow cash into building new models will rebuild the company and return it to profitability. Those plans will about with the help of $25 billion in newly obtained credit that mortgaged the company’s future.
The plan is to become more profitable by 2009 by reducing the workforce by 33%. Ford will cut 44,000 workers and close 16 plants. Mulally said if there are fewer people, there is a greater chance to increase profitability even if market share drops.
As long as Mulally is at the helm, it seems like he will remain committed to his plan. “It is very analogous to flying because you’ve got to know where you’re going and you’ve got to know where you are so you can take corrective action to get back on that plan,” he said.
Ford’s not alone in trying to get themselves out of the economic quagmire called the North American auto industry. GM and DaimlerChrysler have to get their financial and business planning acts together to get them through their various dramas.
Can a business grow by shrinking?
Talk to me.
0 Comments:
Post a Comment
<< Home