Ford Motor Company (NYSE: F) and Chevrolet, which is owned by General Motors Company (NYSE: GM), are the two largest automobile brands in the United States. Both Ford and GM are leaders and fierce competitors in the global automobile industry with portfolios of brands and models that compete in various market segments in the United States and abroad. Ford’s largest brand is its namesake, Ford, while GM’s largest brand is Chevrolet.
The two large car makers may appear to the casual observer to have similar business models. However, potential investors who dive deeper into the details of each company will find key differences as well as many similarities between the two companies. The following are some comparisons between Ford and General Motors’ business models, which are critical factors for potential investors.
Market Share Comparison – United States
Market Share Comparison – Global
In terms of worldwide market share, neither Ford nor General Motors lead the way. As of 2016, Toyota held the largest global market share at 9.2%, followed by Volkswagen Group at 7.2%. Ford was third with 6.5%.
The global market is highly competitive and diversified. As emerging economies with large populations such as India, China and Brazil continue to develop, establishing a significant presence in these areas is critical for the future growth of both Ford and General Motors.
Company Size and Recent Performance
General Motors is a larger company than Ford. GM’s total revenue for the year ending June 2018 was $144.20 billion, down 3.08% on the previous year, compared to Ford’s $158.66 billion, up 3.3% on the previous year. Both companies have achieved significant revenue growth since the economic crisis of 2008 and 2009, but neither has returned to its previous total sales volume. Each company experienced serious financial difficulties in the past 10 years.
Ford’s product line fell behind its competition in the early 2000s, and it began losing market share. It reported substantial net operating losses in 2006, 2007 and 2008. During this period, under the leadership of CEO Alan Mulally, Ford began initiatives to consolidate operations and create more appealing car models. These plans to become more efficient and innovative were already in process when the economic recession hit in 2008. Although the decreased demand for cars during the recession hurt Ford, the company refuses a government bailout offer, avoided bankruptcy and emerged from the recession a stronger company.
General Motors became insolvent in 2008 and required government bailout assistance and a Chapter 11 bankruptcy reorganization in 2009 to keep the company operational. The company has since fully repaid its bailout loan and returned positive net income to shareholders since then. GM is making strategic investments to produce more innovative, efficient and technologically savvy vehicles, which it believes drive future growth. It is also investing significantly in emerging markets such as China.
One of the main differences between these two competitors is the number of brands owned and marketed by each company. Ford’s “One Ford” plan, which was implemented during difficult years for the company leading up to the economic crisis of 2008, included reducing the total number of brands it owns and operates worldwide. Ford’s only significant brands on the global market are Ford and Lincoln. Recent divestitures or discontinuations of brands include the following:
* Aston Martin, sold in 2007
* Jaguar, sold in 2008
* Land Rover, sold in 2008
* Volvo, sold in 2010
* Mazda, controlling interest sold in 2010 (minority interest remains)
* Mercury, discontinued in 2011
Ford’s belief is that by reducing the number of brands and consolidating the number of vehicle platforms upon which various models are built, it can become more efficient and more innovative. In 2007, Ford had 27 different vehicle platforms across the world; in 2015, it had 12 and in 2018 it announced plans to reduce them to five.
General Motors owns and operates a plethora of automobile brands across the globe. These brands include Chevrolet, Buick, GMC, Cadillac, Baojun, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling. GM also has equity stakes in various Chinese joint ventures. While this may seem like a huge brand lineup, GM, similarly to Ford, has divested or discontinued several brands, including the following:
* Oldsmobile, discontinued in 2004
* Pontiac, discontinued in 2010
* Daewoo, discontinued in 2011
* Saturn, discontinued in 2010
* Hummer, discontinued in 2010
* Saab, sold in 2010
General Motor’s belief is that its different brands are essential to serve different market segments. It has created or purchased brands to compete in certain international markets rather than attempting to market its existing brands in those new markets. Many of its discontinued brands were shut down due to poor performance rather than strategic planning. In mid-2017, after 16 consecutive yearly losses in Europe, General Motors sold its European division to French automaker PSA Groupe.
Revenue and profit generation through vehicle financing and leasing arrangements are critical to both Ford and General Motors’ business models. Ford operates Ford Credit and General Motors wholly owns the General Motors Financial Company. Both financing arms serve to provide purchase and leasing financing to each company's respective customers.
Fuel Efficiency and New Technologies
Both Ford and General Motors recognize the importance of improving fuel efficiency and utilizing technology to keep their product lines in favor with customers. Many countries, including the United States, have strict laws requiring improvements in the fuel efficiency and environmental pollution created by vehicles. Both companies have significantly reduced the fuel consumption of their overall fleets of product offerings.
General Motors embraced the hybrid electric vehicle trend and produced the Chevrolet Volt, which won awards for efficiency and innovation. Ford has also produced hybrid models of several of its vehicles, such as the Escape and Focus. Both companies have also found additional efficiencies in their gas-powered cars through the use of different engine technologies, lighter materials and reduced overall size of the cars produced.