Marketing Plan: Fuel Celled Powered SUV.
...Los Angles (California, 2004). In addition there are concerns regarding the adaptation of a universal mechanism to fill up hydrogen tanks and what sort of devices would be adapted to carry this out. The adoption of a standard refueling mechanism is still in the works. The Government of Canada recently contributed $620,000 toward the development, demonstration, and commercialization of hydrogen refueling technology. Hydrogenics Corporation—a leading Canadian designer and manufacturer of fuel cell systems—is contributing the balance of the costs for two projects, which total approximately $1.61 million (Rocky Mountain Institute, 2004). Political and Legal Environment The first aspect that must be tackled involves the safety standards for hydrogen power fuel cell automobiles. The Canadian government is also going to want to spend a considerable time testing the safety of these vehicles; certification is likely going to be costly (Health Canada, 2004). However, the Canadian Government has been very supportive of fuel cell power vehicle production initiatives. The Canadian Transportation Fuel Cell Alliance is a $23 million government initiative that will demonstrate and evaluate fueling options for fuel cell vehicles in Canada. The main objectives of the Alliance are to demonstrate greenhouse gas (GHG) reductions, evaluate different fueling routes for fuel cell vehicles, and develop the necessary supporting framework for the fueling infrastructure (including technical standards, codes, training, certification, and safety) (U.S. Department of Energy, 2004). Different combinations of fuels and fueling systems will be demonstrated by 2005 for light-, medium-, and heavy-duty vehicles. The initiative also will develop standards and training and testing procedures related to fuel cell and hydrogen technologies. Funding for the Alliance is drawn from Canada’s Action Plan 2000, a $500 million greenhouse gas reduction program. The Alliance was announced in 2001 (U.S. Department of Energy, 2004). The program will support several co-funded projects designed to provide a variety of “opportunities for learning and solving technical and economic issues associated with the introduction of fueling for fuel-cell vehicles (U.S. Department of Energy, 2004).” The program has approximately 50 partners, from industry, municipalities, non-government organizations, federal and provincial governments, and universities (U.S. Department of Energy, 2004). Another aspect involves how the motor vehicle insurance industry will deal with the introduction of fuel cell powered vehicles into the public market. Ecological/Natural Environment One of the variables that may hinder the viability of the fuel celled powered SUV is the supply and availability of platinum. Platinum is used at the catalyst within the fuel cell in which it allows the oxygen and hydrogen to combine to produce water and a proton, which is the energy that is used to drive the electrical engine that propels the vehicle. Platinum is one of the more rare metals in the world and world supplies are limited. Approximately 95% of all platinum supplies come from South Africa and Russia, which have both experienced some political instability and distribution problems, which has led to significant oscillations in the price of platinum (International Platinum Association, 2004). Demand for platinum has grown much faster than supplies during the last five years. Platinum has far more industrial uses than either gold or silver. Half of the annual supply of platinum involves industrial consumption, which means that these consumed supplies need to be regularly replenished (HardAssets.com, 2004). Auto catalytic converters and platinum’s role as a catalyst in “cracking” crude oil are both examples of applications that consume this metal. And highlights why it’s in such demand. After a period of surplus and low prices during the early and mid 1990s, when high exports of platinum from Russia coincided with a decline in autocatalyst demand, the situation changed abruptly as the decade drew to a close. Since 1999, the Chinese platinum jewelry market has boomed, and more recently there has been a substantial return to platinum in autocatalysts. Industrial demand, meanwhile, has continued to grow steadily. The result has been a series of annual supply deficits between 1999 and 2001(HardAssets.com, 2004). Competitive Environment Within the Canadian market there are two major competitors who both already have a significant market share in the production and selling of conventional combustion engine SUV and light truck automobiles and are also vigorously developing their own mass distributed fuel cell powered automobiles. These competitors are the Daimler/Chrysler and General Motors. However, Honda and Toyota, which do not have a significant market share in the Canadian market are also developing fuel cell powered vehicles and have also seen their share of the SUV market grow significantly in Canada over the past 10 years. The market share of each of each of these competitors in the light truck market, which includes SUVs, is displayed below. Currently General Motors has the largest market share (32%) while Daimler/Chrysler also has a significant share (24%). Honda and Toyota have market shares of 3% and 1% respectively. Competitors DaimlerChrysler Canada DaimlerChrysler Canada is a subsidiary of DaimlerChrysler International, which is owned by European, U.S. and other international investors. Approximately one billion shares are circulating (DaimlerChrysler, 2004). DaimlerChrysler is unique in the automotive industry: its product portfolio ranges from small cars to sports cars and luxury sedans; and from versatile vans to heavy-duty trucks or comfortable coaches. DaimlerChryslers’ passenger car brands include Maybach, Mercedes-Benz, Chrysler, Jeep®, Dodge and smart. Commercial vehicle brands include Mercedes-Benz, Freightliner, Sterling, Western Star and Setra. It offers financial and other automotive services through DaimlerChrysler Services (DaimlerChrysler, 2004). DaimlerChrysler’s strategy rests on four pillars: global presence, strong brands, broad product range, and technology leadership. DaimlerChrysler has a global workforce and a global shareholder base. With 362,100 employees, DaimlerChrysler achieved revenues of EUR 136.4 billion (USD 171.9 billion) in 2003 (DaimlerChrysler, 2004). DaimlerChrysler Canada has been a prominent member of the Canadian motor vehicle industry for over 78 years. Based in Windsor, Ontario, DaimlerChrysler Canada is the third-largest manufacturer and wholesaler of passenger cars, trucks and automotive components in the Canadian auto industry (DaimlerChrysler Canada, 2004). The principal activity of DaimlerChrysler Canada is the marketing and sale of Chrysler-brand passenger cars, Dodge cars, minivans and trucks, and Jeep® sport-utility vehicles. These vehicles are sold through a retail organization of over 500 dealers from coast to coast (DaimlerChrysler Canada, 2004). DaimlerChrysler Canada's vehicle production facilities include: the Windsor Assembly Plant in Windsor, Ontario which builds DaimlerChrysler's industry-leading Dodge Grand Caravan and Chrysler Town & Country for Canadian and U.S. markets, in addition to the all-new Chrysler Pacifica; and the Brampton Assembly Plant in Brampton, Ontario, the exclusive producer of the Chrysler 300 and Dodge Magnum (DaimlerChrysler Canada, 2004). Around 28,000 employees are working worldwide on the research and development of technical innovations. DaimlerChrysler registers around 2,000 patents every year, thus securing its technology and innovation leadership and an important long-term advantage in the face of an increasingly tough global competition (DaimlerChrysler, 2004). DaimlerChrysler is a pioneer in the development of the fuel cell for automotive application and plays a leading role in this field. Ten years ago DaimlerChrysler presented the world’s very first fuel cell vehicle, NECAR1 (DaimlerChrysler, 2004). Since that time, the technology has been further advanced in numerous concept vehicles. Thirty fuel cell buses can now be regularly seen on the roads of ten major European cities. In the USA, the delivery company UPS transports its packages in fuel cell Sprinters, while in Japan, employees from the Tokyo Gas Co. and Bridgestone Corp. are also on the move in fuel cell vehicles (DaimlerChrysler, 2004). In order to press ahead towards market maturity, a total of sixty Mercedes-Benz A-Class “F-Cells” will be in the hands of customers in Japan, Germany, Singapore and the USA by the end of 2004 worldwide so that they can prove their worth in everyday operation (DaimlerChrysler, 2004). General Motors General Motors of Canada is Canada’s largest automobile producer and distributor and is located in Oshawa, Ontario. It employs Approximately 22,000 Employees. It has an annual Production Capacity of Over 1 Million Vehicles in Four Assembly Plants (General Motors, 2004). General Motors represented 28.1% of Canadian vehicle sales in 2003 which comprised of 455,761 vehicles sold. General Motors of Canada Produced 940,057 vehicles in 2003(General Motors, 2004). GM again made automotive history with a non-stop series of product introductions, launching 21 vehicles at 18 plants, in 2002, accounting for 44 percent of its production volume (General Motors, 2004). In 2003, GM retained its top three position, despite all its new vehicle launches. General Motors was the only domestic automaker to eclipse the industry average, entering territory typically reserved for the Japanese and European automakers. In fact, GM had 12 models finishing in the top three of their respective segment rankings, second among all manufacturers (General Motors, 2004). In 2004, GM had 14 top-three performing vehicles, including two vehicles that were ranked segment leaders, the Chevrolet Suburban in the full-size SUV segment and Buick Century in the study's premium midsize car segment. GM has a history of momentous technological breakthroughs — including hydrogen fuel cell power. General Motors has established extensive hydrogen fuel cell research and development facilities both in the U.S. and Europe (General Motors, 2004). It has produced AUTOnomy, a concept vehicle that captures the vision and potential of hydrogen fuel cell technology, and the revolutionary Hy-wire, a vehicle unmatched in both hydrogen and electronic technology (General Motors, 2004). Table 4. Competitive Analysis Market Share (Intermediate Sized SUVs) Fuel Cell Powered Vehicles being developed 2003 Net Income (World Wide Operations) Strengths Weaknesses Company General Motors 32% AUTOnomy, Hy-Wire $3.822 Billion Canadian Leader, high rate of new vehicle launches, highly rated performance of vehicles Still perceived to have lower quality than Japanese products. Brand struggle with Cadillacs and Buicks had to discontinue Oldsmobile series. Daimler/Chrysler 24% Mercedes Benz A-Class F-Cells $0.564 Billion World leader in luxury vehicles, diversified Problems with mini-van recalls in 1997 to 2000, American brands have perception of inferior quality Ford 22% Fuel Cell powered Ford Taurus $0.495 Billion Leader in R+D, New hybrid SUV Firestone tire recalls, low share price, shrinkage of cash reserves, new CEO Internal Analysis Motor Company of Canada is where the Mustang meets the maple leaf. A wholly owned subsidiary of Ford Motor Company, Ford Canada is that country's longest-running automobile maker. Ford Canada manufactures cars and trucks, as well as hybrid and electric vehicles, at six assembly and manufacturing plants. The company also operates two parts distribution centers, and it oversees about 540 Ford and Ford-Lincoln dealerships, including dealers in every Canadian province. • Organizational Capabilities Organizational Structure Creative Abilities of Management Ford Motor Company has been leading the automotive industry in design innovation for more than 100 years. From the Model T to the GT, we're constantly striving to narrow the gap between concept and production. J Mays is the Vice President of Design at Ford Motor Company, responsible for shaping the design direction of Ford, Mazda, Mercury, Lincoln, Volvo, Jaguar, Land Rover, and Aston Martin. Mays joined the company and was elected to his present position on Oct. 1, 1997 (Ford Motor Company, 2004) Since joining Ford Motor Company, Mays has completed the development of several new production models including the Ford GT40, the 2002 Ford Thunderbird, and the all-new 2002 Ford Explorer and Mercury Mountaineer. He has also led the development of several concept vehicles including the Ford Forty-Nine, Jaguar F-Type, and Volvo Safety Car Concept (Ford Motor Company, 2004). Mays has received numerous professional awards and recognition for his work. He received the Harvard Design School annual Excellence in Design Award in February 2002. In September 2002, Mays received the Don Kubly Professional Attainment Award from the Art Center College of Design (Ford Motor Company, 2004). Camilo Pardo drew and re-drew the GT concept design in his mind for more than 10 years. Even when he was given permission to do an exploratory clay model of a modern GT in 1999, he never really expected to create a fully developed concept car (Ford Motor Company, 2004). As chief designer in Ford Motor Company's Living Legends Studio, Pardo has led the development and design of the timeless GT concept. The re-birth of this legend first materialized in 1999, but it began long before—with Pardo's obsession with the 1960s-era racing legend (Ford Motor Company, 2004). Clarity of Strategic Goals At Ford we have had great success on defining and implementing our company goals. This summer we will be introducing the world’s first hybrid SUV, the HEV Ford Escape that combines a combustion engine with an electrical motor. This vehicle contains a regenerative braking system that charges up the main battery, which allows this vehicle to run on electricity or gas or both. This success is due to the maintaining the focused strategy of Ford. When William Clay Ford, Jr. become CEO in 2001 began to guide Ford into the 21st century by pushing the goal of Ford becoming the number one producer of vehicles by product development of more environmentally benign vehicles and by designing vehicles that run on alternative fuels. In January 2002 Mr. Ford announced a plan to restore the company to strong profitability by mid-decade. His revitalization plan is focused on improving quality, lowering costs and delivering exciting new products to customers. In the first year of the plan the financial performance of the company improved by nearly $5 billion (Ford Motor Company, 2004). Level and Rate of Product Innovation Ford Motor Company offers more alternative fuel vehicles (AFVs) than any major automobile manufacturer. In addition, Ford is leading an effort to improve access to AFV refueling infrastructure. Ford is pursuing fuel cell vehicles that run on hydrogen and produce only water as a by-product. Ford already has invested significantly in fuel-cell research, although much more needs to be done before the technology is ready for the commercial market and applied in mass production. Ford plans to have a small fleet of fuel cell vehicles by 2004, based on the world's best-selling car, the Ford Focus. With a staff of more than 1,100 people, R&A is home to many of Ford‘s brightest and best technical minds. Our highly skilled staff comes from a variety of educational backgrounds, spanning all areas of science, engineering and business. The technical staff is comprised of bachelor’s, master’s and Ph.D. level engineers and scientists in an almost equal distribution. R&A, coincidentally, is home to the highest concentration of Ph.D.’s in the entire company. All totaled, R&A accounts for over one-half of the intellectual property at Ford Motor Company in any given year. In 2002 alone, R&A had 245 patents granted, as well as many patent applications and invention disclosures (Ford Motor Company, 2004). Corporate Culture The corporate culture at the Ford Motor Company is based on seven principles: Accountability We will be honest and open and model the highest standards of corporate integrity. We will achieve this by: • Being responsive to stakeholders’ concerns on the impact of our operations, products and services through public disclosure and regular reporting • Making accurate and forthright statements, competing ethically, avoiding conflicts of interest and having zero tolerance for the offer, payment, solicitation or acceptance of bribes Community We will respect and contribute to the communities around the world in which we work. We will achieve this by: • Respecting and supporting, in line with the legitimate role of business, the basic human rights of all people within our businesses and throughout our entire value chain. • Being sensitive to, and engaging in, the cultures of the communities in which we participate. • Making responsible and mutually beneficial investment in the communities we serve. Environment We will respect the natural environment and help preserve it for future generations. We will achieve this by: • Working to provide effective environmental solutions. • Working to continuously reduce the environmental impacts of our business in line with our commitment to contribute to sustainable development. • Measuring, understanding and responsibly managing our resource use, especially materials of concern and nonrenewable resources. • Working to eliminate waste. Financial health We will make our decisions with proper regard to the long-term financial security of the Company. We will achieve this by: • Striving to create value for our shareholders that is sustainable over the long term. • Seeking enhanced stakeholder loyalty as a route to competitive advantage and long-term growth. Products and customers We will offer excellent products and services. We will achieve this by: • Focusing on customer satisfaction and loyalty and keeping our promises. • Using our understanding of the market to anticipate customer needs. • Delivering innovative products and services that offer high value in terms of function, price, quality, safety and environmental performance. Quality of relationships We will strive to earn the trust and respect of our investors, customers, dealers, employees, unions, business partners and society. We will achieve this by: • Building and maintaining a caring culture of partnership and mutual benefit. • Developing individual and team skills so employees may reach their full potential and contribute to the success of the Ford Motor Company. • Creating a business climate that encourages innovation, learning and exceptional performance. • Actively pursuing the benefits derived from a diverse workforce, as well as those from the diversity of perspectives provided by our stakeholders. Safety We will protect the safety and health of those who make, distribute or use our products. We will achieve this by: • Working to create the safest possible workplace. • Striving to continuously reduce the risk of accidents, injuries and fatalities involving our products. • Striving to protect people and property. Manufacturing Capabilities Ford of Canada’s operations include a national headquarters, six regional offices, six vehicle assembly and engine manufacturing plants, two parts distribution centres, and affiliates including Ford Credit, Jaguar, Volvo, Land Rover and Hertz. In addition to the nearly 16,000 Ford of Canada employees, 21,000 people are employed in the 500 Ford and Ford-Lincoln dealerships across Canada (Industry Canada, 2004). Oakville, Ontario Minivans (294,000 unit capacity) - Windstar - Freestar (to replace Windstar in 2003) Pickup trucks (208,000 unit capacity) - Ford F Series St. Thomas, Ontario Cars (237,000 unit capacity) - Ford Crown Victoria - Mercury Grand Marquis - Mercury Marauder Windsor, Ontario Components - aluminum castings - iron castings - V6 engines - V8 engines We would have to create new facilities to manufacture the fuel cell SUV. Financial Capabilities In the financial year 2003 the Ford Motor Company garnered a net income of 496 million dollars (U.S.), a 1,475 million dollar improvement from 2002. Revenues and total sales, globally, were 164.2 billion dollars (U.S.), up 1.2% since 2002. This is despite the fact that we had a lower sales volume (Ford Motor Company, 2004). Marketing Capabilities Market In 2002 Canada Ford was third in market share with 22% of the market share of light duty trucks and SUV’s (Ford Motor Company Canada). In 2004 Escape was Canada's best-selling SUV overall with a 23 per cent increase in sales from the same month last year and recorded its best April ever. The Ford brand was the best-selling brand of SUVs in Canada. So far we have had great success in marketing the Escape and the explorer ands within the next few months we will be selling the Escape Hybrid to North American consumers. Product In 2000 Ford had to recall the Explorer, its leading SUV product, due to the abnormally high rate of accidents related to the Firestone tires loosing their tread when driving at high rates of speed. This resulted in a significant reduction of sales and Ford was subjected to a number of lawsuits in the United States. However, in 2001, Ford introduced the Escape, which has been setting sales records ever since its inception into the market. The Escape has become the best selling SUV in Canada. In addition the Ford F-series trucks have been the best selling truck in the Canadian market, with a reputation for durability and quality. The new Escape Hybrid is expected to have huge sales when it is introduced in a few months. It is expected that the new fuel cell hydrogen powered SUV will receive the same positive response as the Escape did when it was introduced. Distribution Ford overseas approximately 540 Ford-Lincoln dealerships in almost every province. Ford Motor Company sells and services its vehicles through a network of independent, franchised dealers. We see our dealers as partners and acknowledge a responsibility to help them maintain healthy businesses (Wharton, 2004). Pricing In 1999 Ford lowered the prices of its high-end vehicles a little bit – enough to stimulate demand but not enough to cut too deeply into its margins. This adjustment was one of the key reasons that Ford earned $7.2 billion in 1999 – the most annual profit ever for any auto marker (Wharton, 2004). What is noteworthy is that from 1995 to 1999, Ford’s U.S. market share fell from 25.7% to 23.8%, according to BusinessWeek (2004). But the decline did not spell disaster. Although Ford sold 420,000 fewer low-margin cars because of its new pricing strategy, it boosted sales of high-margin vehicles by 600,000. Ford cannibalized its low-end cars a bit, but it was worth it (Wharton, 2004). SWOT Analysis Strengths -4th on the Fortune 500 List (U.S. only) -4th on the Global 500 List -One of world’s best known brands -Their Web strategy has cut car build costs by as much as $380 per car -Have already invested heavily in alternate fuel sources -Number one producer of trucks in Canada Weaknesses Firestone Tire recalls caused Stock Price to Suffer--$14.70, Lowest in Years -CEO Jacques Nasser and Chairman Bill Ford Jr. could not get along leading to Bill Ford taking over as CEO. Still turmoil and controversy of that -Cash Reserves Have Sunk to $4.1 Billion -$13 Billion on Acquisitions -$3.5 Billion to Cover Tire Recalls -Sometimes seen as "safe", "boring" Opportunities -Have a chance to become more environmentally friendly with cleaner engine emissions and by working with environmental groups to help clean the environment -Ford have already started investing in Solar Power, and have a chance to become a market leader -They can use their Web strategy to cut costs further -Hybrid Escape may give Ford a good name with regards to environmentally benign vehicles -Huge untapped market for fuel cell SUVs and other vehicles Threats -Competition is huge. -Internal strife will hurt the company. -Threat of substitute products such as Natural gas, Electricity, Ethanol, Vegetable oil, Sunlight, Water -Intensity of Rivalry among competitors worldwide -Daimler/Chrysler, Toyota, Honda and GM are all spending billions of fuel cell and alternative fuel vehicles. 3. Segmentation and Targeting The product that we are developing, our fuel cell powered intermediate sized sport utility vehicle, will be oriented towards those who enjoy the power, durability and the size characteristics of a conventional combustion powered SUV. These same consumers are also increasingly adverse to the increasingly escalating fuel costs that will ensue within the next ten to twenty years when the world’s oil reserves begin to dwindle. The main benefit of this large automobile is that it will have zero or virtually zero emissions. This vehicle will be powered by a fuel cell that will derive its power from hydrogen. Hydrogen is a ubiquitous fuel source that produces no emissions when it is burned. Hydrogen can be harnessed form numerous water in which water molecules are split into oxygen and hydrogen through the use of solar, nuclear, wind or hydroelectric electricity sources. This vehicle will last considerable longer than conventional SUV’s due to the fact that there are significantly less moving parts with this vehicle, which is inherent in any fuel cell powered vehicle. In addition this vehicle will be considerably quieter than conventional vehicles due to the significant reduction in the amount of moving parts. This vehicle is expected to last at least 15 years if not longer and will require significantly less repairs and maintenance due to the fact that the combustion engine will be replaced by a electrical motor powered by the fuel cell. The vehicle will still retain the safety, comfort features and style that current consumers expect from an SUV. This product will be targeted at middle to upper income families that seek a larger vehicle that has the same comfort and safety features as a conventional SUV. In addition this vehicle will also be targeted at the affluent segments, particularly men between the ages of 34 to 55, of the population who want to have the prestige of owning an SUV, but have an awareness and consciousness of the environment and also will enjoy a quieter and more reliable vehicle. Consumers who live in rural areas and more climatically adverse regions of the country will also be targeted due to the fact that they seek a vehicle with four-wheel drive capability and also want durability. Table 5 shows the market segment by age for all vehicle categories. This table shows that our fuel cell powered SUV has demand across virtually all the age segments, particularly within the 30 to 59 demographic. This segment consists of families and the more affluent potential customers and likely also includes a significant amount of males. To summarize, this product is directed at three distinct market segments: Families This segment is looking for a reliable, safe and economical vehicle that has the size to accommodate moderate to large families. In addition they are looking for a vehicle that has the same safety features as a conventional SUV. This segment is price sensitive and is looking for value in their purchase. The fact that this vehicle is run by a fuel cell, which makes is less prone to repair and wear and tear and the fact that it is environmentally benign make this vehicle very desirable to this segment. Affluent Consumers This segment consists of males between the ages of 25 to 50 and don’t have any children who have a significant amount of disposable income. This segment is looking for prestige when looking to purchase a vehicle. They like the rugged masculine appearance of an SUV and also like the fact that they are purchasing a vehicle that is based on the latest technology. This segment likes purchasing items that are technologically advanced like digital cameras and computers due the novelty of the technology. This segment tends to consist of urban residents. Rural Drivers This segment consists of drivers who live in rural areas that are subjected to inhospitable weather conditions, particularly in the winter. They are looking for an affordable SUV that has excellent handling ability and is reliable in extreme cold. This segment is looking for practicality in a vehicle with excellent four wheel drive capability. This segment tends to be a bit more conservative and might be a bit adverse to the newly developed fuel cell powered drive train. However, they will see the utility in the reliability and longer life of this vehicle. 4. Company Objectives The objectives of the Ford Motor Company are directly related to the introduction of our fuel cell powered SUV into the North American automobile market before our competitors launch their own fuel cell powered SUV’s. We have established a target of date of early 2010 for the introduction of our vehicles. By doing this we will get first mover’s advantage in which we will enjoy no direct competition form our competitors in the retail SUV market. The specific goal of this project is to become the leading producer of light trucks in North America by 2013, this would be accomplished by focusing on our intermediate sized fuel cell powered SUV. The impending shortage of petroleum will allow us to gain a definite advantage over our competitors and enjoy unfettered success in this market. Our specific goal is to increase our market share of light trucks from the current market share of 22% to 35% by 2013. By 2010 we will be mass-producing these fuel cell powered SUV’s. This would consist of having a annual production and sales of 100,000 units in 2010, 200,000 units in 2011 and 300,000 units in 2012, compared to our current production of 172,000 per year of intermediate sized SUV’s (Ford Canada, 2004) per year (See Table 6). It is expected that revenues from these sales will amount to $4.5 billion in 2010, $9 billion in 2011 and $13.5 billion in 2012 and 2013 respectively for a total of This is based on a market price of $45,000 per vehicle and production costs of $18,000 per vehicle or a 40% profit margin. It is expected that after four years, the market introduction stage of this product will end and that our competitors will catch up with us. The research and development for this vehicle is expected to cost a total of 4 billion dollars between 2004 and 2010 and the upgrade to our production facilities is expected to cost approximately another 2 billion dollars. Based on this it is expected that the breakeven point would be 222,222 units and that the payback period would be approximately a year and a half. The return on investment of this project is expected to be 608% in the first four years the introduction of this product. Table 6. Expect Sales of the New Fuel Cell Powered SUV Year 2010 2011 2012 2013 Number of Vehicles sold 100,000 200,000 300,000 300,000 5. Strategic Options Analysis of Test of Fit between SUV project and SWOT (Original SWOT Analysis in lighter gray) Strengths -4th on the Fortune 500 List (U.S. only) -4th on the Global 500 List -One of world’s best known brands -Their Web strategy has cut car build costs by as much as $380 per car -Have already invested heavily in alternate fuel sources -Number one producer of trucks in Canada -Have the financial resources to carry out this project -Ford Brand name will be huge benefit in marketing this vehicle -Have experience with developing and marketing the Explorer Hybrid SUV, which has experienced huge market success -Already have invested billions in alternative fuel source vehicles, and is familiar with the new fuel cell technology and partnership with Ballard Power Systems -New CEO Bill Ford Jr. is a visionary and truly believes that the future of Ford rests with new innovative vehicles that embrace alternative fuel sources -Already have established and experienced distribution network and distribution channel and significant experience in marketing and selling SUV’s in Canada Weaknesses -Firestone Tire recalls caused Stock Price to Suffer--$14.70, lowest in Years -CEO Jacques Nasser and Chairman Bill Ford Jr. could not get along leading to Bill Ford taking over as CEO. Still turmoil and controversy of that -Cash Reserves Have Sunk to $4.1 Billion -$13 Billion on Acquisitions -$3.5 Billion to Cover Tire Recalls -Sometimes seen as "safe", "boring" -Cash reserves may become more depleted due to expenses associated with the research and development required for this project -Still has to get over “safe/boring” image to get consumers to embrace new technology -Difficult time to raise cash through the issuance of equity due to low share price -Need strong leadership to push the project down distribution channel and motivate all channel members Opportunities -Have a chance to become more environmentally friendly with cleaner engine emissions and by working with environmental groups to help clean the environment -Ford have already started investing in Solar Power, and have a chance to become a market leader -They can use their Web strategy to cut costs further -Hybrid Escape may give Ford a good name with regards to environmentally benign vehicles -Huge untapped market for fuel cell SUVs and other vehicles -Fuel cell powered vehicles represent the greatest opportunity for Ford since Henry Ford introduced his revolutionary mass production techniques, potential to make billions in dollars in revenues -Fuel cell powered SUV would be in market introduction stage represents huge market opportunity and gives Ford the ability to attain status as the number one producer of light trucks in Canada -Escape Brand of intermediate SUV’s has already set record sales for Ford since its introduction in 2001 -Have already introduced Hybrid Escape with huge fanfare, we could take advantage of the momentum created by the introduction of this vehicle. The Hybrid Escape will give Ford a name in the alternative environmental vehicle segment. Threats -Competition is huge. -Internal strife will hurt the company. -Threat of substitute products such as Natural gas, Electricity, Ethanol, Vegetable oil, Sunlight, Water -Intensity of Rivalry among competitors worldwide -Daimler/Chrysler, Toyota, Honda and GM are all spending billions of fuel cell and alternative fuel vehicles. -Daimler/Chrysler, Honda, Nissan, Toyota and General Motors are all aggressively carrying out research and development of fuel cell powered vehicles -Toyota is in the midst of developing its own fuel cell powered Forerunner brand -If Ford does not act quickly, then they will not only loose out in the fuel cell SUV segment, but they will quickly be technologically be behind competitors. This would be a significant threat to their very existence -Must begin research and development on fuel cell powered vehicle immediately to stave off competition -Ford has had problems in past with consumer perception of poor quality products, especially compared to Japanese competitors The three segments being targeted by this project have been targeted before through the introduction of our other conventionally powered SUV’s and other Ford vehicles such as the Explorer and the Escape. Synergies already exist in that the sales and marketing distribution channels are already established and we have an experienced sales force. In addition Ford currently is in the lead in the market share of pickup trucks in Canada and the Ford Escape SUV is poised to become the leader in the market share of intermediate sized SUV’s in Canada. The proposed fuel cell SUV fits very well with the capabilities and long-term goals of Ford. In addition, it is a strategic decision in that it anticipates the...