GLOBAL FINANCE

``If I was to describe to you a business where you have to manage
worldwide overcapacity, huge fixed costs, government-supported
industry in certain countries and too many players, you would
have to be mad to say it's something you want to get into.''

Bill Ford, chairman of Ford Motor Company

FORD MOTOR COMPANY LIFE AS A GIANT

Ford Motor Company is the quintessential multinational. Henry Ford,
the firm's founder, was a key figure in the development of mass-
production methods that had such a transforming effect on economic
growth in the twentieth century in 1913, he achieved a 90% reduction
in car assembly time, a classic illustration of how economic growth
can be achieved by finding ways of producing more using existing
resources.

The world's second largest car manufacturer after General Motors,

in 2000 Ford had a turnover of $170bn but a relatively low income
before taxes of $8.2bn. The company employs nearly 350,000 people
across the world and sold some 7.4 million cars and trucks in 2000.

Like its main competitors, its principal markets are in the developed

countries of North America and Western Europe although Ford has
a controlling share of Mazda, it only sells some 26,000 units in Japan,
approximately half of its sales in Argentina.

The problem: overcapacity

A new car is a ``big ticket'' item for the consumer, costing a substantial
proportion of annual salary, if not more, which means that people
often have to borrow money to make their purchase. To persuade
more customers to buy cars, Ford and its rivals have developed
substantial consumer loan and corporate leasing operations. In Ford's
case, its ``Financial Services Sector'' generated $28.8bn in revenues in
2000.

For many decades, car manufacturers operated a ``push'' system,

producing vehicles in huge numbers in expensive plants and delivering
them to the consumer via a tightly controlled network of dealers. As
more and more manufacturers around the world entered the field, the
markets of the developed world progressed towards near-saturation