Ford 2014 Annual Report Download - page 20

ITEM 1A. Risk Factors.
We have listed below (not necessarily in order of importance or probability of occurrence) the most significant risk
factors applicable to us:
Decline in industry sales volume, particularly in the United States, Europe, or China, due to financial crisis,
recession, geopolitical events, or other factors. Because we, like other manufacturers, have a high proportion of
relatively fixed structural costs, relatively small changes in industry sales volume can have a substantial effect on our
cash flow and profitability. If industry vehicle sales were to decline to levels significantly below our planning
assumption, particularly in the United States, Europe, or China, due to financial crisis, recession, geopolitical events, or
other factors, such as occurred during 2008 and 2009, our financial condition and results of operations would be
substantially adversely affected. For discussion of economic trends, see the “Overview” section of Item 7.
Decline in Ford’s market share or failure to achieve growth. To maintain competitive economies of scale and
grow our global market share, we must grow our market share in fast-growing newly developed and emerging markets,
particularly in our Asia Pacific region and our Middle East & Africa region, as well as maintain or grow market share in
mature markets. Our market share in certain growing markets, such as China, is lower than it is in our mature
markets. A significant decline in our market share in mature markets or failure to achieve growth in newly developing
or emerging markets, whether due to capacity constraints, competitive pressures, protectionist trade policies, or other
factors, could have a substantial adverse effect on our financial condition and results of operations.
Lower-than-anticipated market acceptance of Ford’s new or existing products. Although we conduct
extensive market research before launching new or refreshed vehicles, many factors both within and outside our
control affect the success of new or existing products in the marketplace. Offering vehicles that customers want and
value can mitigate the risks of increasing price competition and declining demand, but vehicles that are perceived to be
less desirable (whether in terms of price, quality, styling, safety, overall value, fuel efficiency, or other attributes) can
exacerbate these risks. For example, if a new model were to experience quality issues at the time of launch, the
vehicle’s perceived quality could be affected even after the issues had been corrected, resulting in lower sales
volumes, market share, and profitability. In addition, with increased consumer interconnectedness through the internet,
social media, and other media, mere allegations relating to quality, safety, fuel efficiency, corporate social responsibility,
or other key attributes can negatively impact our reputation or market acceptance of our products, even where such
allegations prove to be inaccurate or unfounded.
Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning
assumption, particularly in the United States. A shift in consumer preferences away from larger, more profitable
vehicles at levels beyond our current planning assumption could result in an immediate and substantial adverse impact
on our financial condition and results of operations. Although we have a balanced portfolio of small, medium, and large
cars, utilities, and trucks with competitive fuel efficiency, a shift in consumer preferences away from sales of larger,
more profitable vehicles at levels greater than our current planning assumption—whether because of spiking fuel
prices, a decline in the construction industry, government actions or incentives, or other reasons—still could have a
substantial adverse effect on our financial condition and results of operations.
An increase in or continued volatility of fuel prices, or reduced availability of fuel. An increase in fuel prices,
continued price volatility, or reduced availability of fuel, particularly in the United States, could result in weakening of
demand for relatively more-profitable large cars, utilities, and trucks, while increasing demand for relatively less-
profitable small vehicles. Continuation or acceleration of such a trend beyond our current planning assumption, or
volatility in demand across segments, could have a substantial adverse effect on our financial condition and results of
operations.
Continued or increased price competition resulting from industry excess capacity, currency fluctuations,
or other factors. The global automotive industry is intensely competitive, with manufacturing capacity far exceeding
current demand. According to the January 2015 report issued by IHS Automotive, the global automotive industry is
estimated to have had excess capacity of about 29 million units in 2014. Industry overcapacity has resulted in many
manufacturers offering marketing incentives on vehicles in an attempt to maintain and grow market share; these
incentives historically have included a combination of subsidized financing or leasing programs, price rebates, and
other incentives. As a result, we are not necessarily able to set our prices to offset higher costs of marketing
incentives, commodity or other cost increases, or the impact of adverse currency fluctuations, including pricing
advantages foreign competitors may have because of their weaker home market currencies. Continuation of or
increased excess capacity could have a substantial adverse effect on our financial condition and results of operations.
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