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Module 4: Simple Analysis and Parsimonious Forecasting

Module 4: Simple Analysis and Parsimonious Forecasting. The Ford Motor Company By: Paula Casini. Ford Motor Company. Automotive Sector – sale of vehicles, service parts and accessories Ford North America Ford South America Ford Europe Ford Asia Pacific Africa Financial Services Sector

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Module 4: Simple Analysis and Parsimonious Forecasting

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  1. Module 4: Simple Analysis and Parsimonious Forecasting The Ford Motor Company By: Paula Casini

  2. Ford Motor Company • Automotive Sector – sale of vehicles, service parts and accessories • Ford North America • Ford South America • Ford Europe • Ford Asia Pacific Africa • Financial Services Sector • Ford Motor Credit Company – vehicle related financing, leasing and insurance • Other Financial Services – holding companies and real estate

  3. Return on Enterprise Operations • RNEA = EPAT / avg (NEA) • Combination of low EPAT and high avg NEA

  4. Breaking Apart RNEA • RNEA = EPM * EATO • EPM = EPAT / Sales • EATO = Sales / avg (NEA)

  5. Parsimonious Revenues • Ford’s sales growth consistently declining • Average over last three years = 4.40% • Industry expected growth rate 2.4% • Analysts predict only small increase in sales for 2014 and 2015 • Growth Assumption = 2.25% (inflation)

  6. Parsimonious EPM (from sales) • Ford’s EPM from total EPAT was 3%, 11% and 1% in 2010, 2011 and 2012 respectively • Average EPM for automotive industry is 6% • EPAT very volatile, sales only expected to grow at the rate of inflation • Assumption = 6.5%

  7. Parsimonious EATO • Stable EATO • Assumption = 1.7

  8. Parsimonious Assumptions • Sales Growth = 2.25%

  9. Parsimonious Assumptions • Sales Growth Rate = 2.25% • EPM = 6.5%

  10. Parsimonious Assumptions • Sales Growth Rate = 2.25% • EPM = 6.5% • EATO = 1.7

  11. Questions?

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