The automotive sector comprises various businesses and institutions engaged in developing, manufacturing, producing, advertising, and selling automobiles. The automobile marketplace is an oligopoly in a supersaturated field with a few influential players, which explains the lower profitability. Given the automobile industry’s size and importance to many local economies, most nations are developing legal instruments that incentivize production, particularly export assembly (Saidani et al., 2018). Thus, these and other prospective regulation changes are extremely crucial for global car industry participants, and there is much discussion about the potential effect. Corporate governance examines how a firm employs rules and procedures to influence business choices, adhere to the law, and fulfill stakeholder duties (Bhagat & Bolton, 2019). Internal control failings, such as aggressive tax evasion, corruption, exorbitant CEO compensation, or persistent lobbying, destroy reputations and erode confidence (Bhagat & Bolton, 2019). Therefore, this paper aims to conduct a performance analysis of three automobile manufacturers, Ford, BMW, and Toyota Motors, focusing on regulatory frameworks and corporate governance.
Firm Backgrounds and Performance Overview
Ford Motors Corporation
Henry Ford and 11 partner entrepreneurs started the Ford Motor Company in 1903. Based in Dearborn, Michigan, the corporation produces passenger vehicles and tractors and automobile components and equipment. In 1896, Henry Ford developed his first experimental automobile in a workshop outside his Detroit house (Fetzer, 2017). In July 1903, after creating the Ford Motor Corporation, the first Ford automobile, the actual Model A, was constructed at the Mack Avenue facility (Fetzer, 2017). In 1908, Ford produced the first trendy Model T vehicle. The need for this vehicle was so enormous that Ford had to create new mass manufacturing techniques to make enough of it.
In 1911, Ford created the firm’s first subsidiary assembly factory in the USA in Kansas City, Missouri, and the institution’s first international manufacturing facility in Manchester, England. In 1913, Henry Ford established the world’s first production line for automobiles, and in 1914, he instituted the $5 daily salary for an eight-hour day, replacing the $2.34 regular wage for a nine-hour function (Fetzer, 2017). Assembly-line manufacturing enabled the Model T touring-car edition’s cost to be reduced from $850 in 1908 to less than $300 in 1925 (Fetzer, 2017). In 1908, the business created its first overseas business department in Paris. By mid-1914, there were over 500,000 Model Ts on the road worldwide, and by 1923, the company was manufacturing more than half of all vehicles sold in the United States (Ford, 2019). By the late 1920s, Ford had established more than twenty assembly factories throughout Latin America, Asia, Australia, Europe, Canada, and South Africa.
With 15 million Model Ts built, Ford became the globe’s most recognized automobile manufacturer. The final Model T and the first novel Model A were created in 1927, succeeded by the new Ford V-8 in 1932 (Ford, 2019). In 1922, Ford purchased the 1917-founded Lincoln Motor Company, which would manufacture Ford’s premium Lincolns and Continentals (Britannica, 2021). Ford developed the first Mercury in 1938, a vehicle priced between Lincoln and Ford. Henry Ford had already purchased 58.5% of the enterprise’s equity in 1906. The business created such variants as the Mustang (1964) and the Thunderbird (1954) under Henry Ford II’s stewardship. Ford purchased Jaguar, a British premium automobile company, in 1989–90, while I n 1993, Aston Martin became a wholly-owned branch. Subsequent purchases include Hertz Ltd in 1994, Volvo’s automotive business in 1999, and the Land Rover trademark of sport utility vehicles (SUVs) in 2000 (Ford, 2019). Ford also acquired a sizable stake in Mazda Motor Corporation.
Ford, nevertheless, started selling these trademarks in the early twenty-first millennium as it deteriorated. Ford sold Hertz in 2005 and Aston Martin in 2007. Ford (2019) enumerates that, in 2008, it sold Jaguar and Land Rover to India’s Tata Motors Ltd. Ford began divesting its Mazda holdings in 2008 and completed the process in 2015 (Ford, 2019). In December 2008, US President George W. Bush proposed an urgent financial intervention initiative to assist the nation’s Big Three automakers, General Motors, Chrysler LLC, and Ford, to avert the state’s ailing auto sector from collapsing (Ford, 2019). The proposal made $13.4 billion in USA loans instantly accessible from the Troubled Assets Relief Program (TARP), a $700 billion fund established by Congress to rescue the banking sector after the subprime mortgage issue (Cooper et al., 2019). The loans would enable the automakers to operate until March 2009, at which point they would be expected to show financial sustainability or repay the money
BMW, or Bayerische Motoren Werke AG, is a German automobile manufacturer known for its high-quality sports cars and motorbikes. It started in 1916 as BMW, a manufacturer of aviation engines (BMW Group, 2022). BMW AG manufactures and distributes vehicles and motorbikes in Germany. It functions in four categories: automotive, motorcycles, banking sector, and other businesses. Automotive designs produce, integrate, and market automobiles and off-road machines under the BMW, Rolls-Royce, and MINI trademarks and spare components (BMW Group, 2022). Motorcycles are a niche that concentrates on the premium market.
The consumer banking section provides retail clients with credit lending, leasing, and other financial instruments. The different entities sector comprises operations related to shareholding and group finance. BMW started manufacturing automobiles in 1928. The R32 motorbike produced by the business achieved a global maximum speed that stood until 1937 (Hansen, 2017). By 1959, the company was on the edge of bankruptcy, and its executives were considering a sale to Daimler-Benz.
On the other hand, BMW emerged from its financial crisis that year with German industrialist Herbert Quandt purchasing a majority stake in it. BMW debuted the 700 series, which the similarly popular 1500 model quickly followed (Lewin, 2021). At approximately the same time, the business produced a new motorbikes line especially renowned in the United States. BMW was entrenched as a luxury vehicle manufacturer by the end of the twentieth century. In an unsuccessful effort to increase market dominance as a sport-utility vehicle firm, BMW bought the Rover Group in 1994 but lost about $4 billion before relinquishing the Land Rover trademark to Ford in 2000 (Donnelly et al., 2017). BMW found considerable success with the reintroduction of the British MINI in 2001; another British company, Rolls-Royce, became a component of BMW in 2003 (Donnelly et al., 2017). Representatives of the Quandt family remained to have a considerable interest in the corporation.
Toyota Motors Company
Toyota Metropolis, Japan’s industrial zone east of Nagoya, is home to the primary office. In 2008, it surpassed General Motors to become the world’s biggest automotive maker for the first time. Numerous of over 1,000 branches and affiliate firms are engaged in manufacturing cars, automotive components, and residential and retail vehicles (Toyota Motor, 2022). In 1933, Toyoda Kiichiro established what would become the Toyota Motor Corporation as a branch of the Toyoda Automatic Loom Works, Ltd., afterward renamed Toyota Industries Company, of which it is currently a part (Toyota Motor, 2022). Its first mass-produced automobile, the Model AA sedan, was introduced in 1936. The segmentation was established as the Toyota Motor Company, Ltd. the subsequent year, with Kiichiro as president. Toyota later founded other subsidiary enterprises, namely Toyoda Machine Works, Ltd. (1941) and Toyota Auto Body, Ltd. (1945) (Profiroiu et al., 2020). During World War II, the business discontinued passenger automobile manufacture in favor of truck manufacturing.
Confronted with destroyed facilities and a destabilized market after World War II, the business did not begin consumer automobile production until 1947, with the debut of the Model SA. By the 1950s, Toyota’s vehicle manufacturing plants were fully operational, and the business launched a thorough study of American automakers to regain competitiveness, due to the United States’ perceived technological and economic supremacy. Toyota officials visited the manufacturing plants of firms like Ford Motor Company to examine cutting-edge automobile assembly techniques. They then adopted them in their operations, resulting in a near-instant boost in productivity. Toyota Motor Sales, USA, Inc. was founded in 1957, and in the subsequent year, the business introduced the Toyopet sedan, its first design offered in the USA (Profiroiu et al., 2020). It got terrible reviews due to its exorbitant price and absence of horsepower. The Land Cruiser, a four-wheel-drive utility vehicle introduced in 1958, was a more prosperous model (Profiroiu et al., 2020). The Toyopet was modified for American customers and reintroduced as the Toyota Corona in 1965, becoming the firm’s first significant accomplishment in the USA.
The firm developed rapidly throughout the 1960s and 1970s and started exporting considerable quantities of vehicles to other marketplaces. Toyota purchased Hino Motors, Ltd., a producer of minibusses and big trucks, in 1966; Nippondenso Corporation, Ltd., a designer of electric auto parts; and Daihitsu Motor, Ltd., a developer of automobiles (1967) (Profiroiu et al., 2020). The firm thrived in the American economy, earning a reputation for affordable, fuel-efficient, and dependable vehicles like the Corolla, introduced in the USA in 1968. The corporation adopted its current name in 1982, after the merger of Toyota Motor Sales Group, Ltd and Toyota Motor Company (Profiroiu et al., 2020). Two years later, Toyota joined with General Motors to establish New United Motor Production, Inc., a dual-brand assembly facility in California, where Toyota started US operations.
The firm continued to develop significantly well into the twenty-first century. It invented its premium brand, Lexus (1989), and the world’s first surplus-produced hybrid car, the Prius (1997) (Profiroiu et al., 2020). The business continued to grow into new areas, launching the Scion brand (2003) and introducing the world’s first premium hybrid car, the Lexus RX 400h, in 2003 (Profiroiu et al., 2020). Nevertheless, the organization has since encountered severe financial difficulties, including declining sales due to the 2008 great recession and a global safety recall of more than eight million automobiles in 2010 (Profiroiu et al., 2020). All these eventually forced the entity to stop production and supply numerous of its supermodels temporarily.
Environmental protection has generated considerable speculation regarding its impact on the automotive sector. The USA requires automakers to create light-duty cars that utilize less than 4.1 liters of gasoline per 100 kilometers and 3.6 liters of diesel per 100 kilometers (Jing et al., 2020). By 2020, car fuel’s carbon dioxide concentration should be reduced by 10% to enhance fuel quality (Jing et al., 2020). As a result, by 2035, Ford intends to cut scope 1 and 2 pollutants from processes by 76%, based on 2017 pollution, and scope three emissions from all of the firm’s merchandise by 50%, based on 2019 carbon output (Jing et al., 2020). Strict emission rules in significant trade areas such as the EU would compel global manufacturers to develop technology to meet them even if their home markets are not as stringent. Following this legislation, BMW Group specifically emphasizes raw materials deemed to be so-called conflict commodities as part of its sustainability tactic.
Tungsten illustrates this as it is employed in smartphone resonance alarms and light bulb electrodes and drill and grinding bits for commercial gear used in the automobile manufacturing process. Additionally, compared to primary tungsten, this lowers energy usage by 70% and CO2 emissions by more than 60% (Bharadwaj, 2018). On the other side, in Japan, cars less than ten years old are permitted to produce no more than 1% carbon monoxide and 300ppm automobile exhaust (Barrett & Therivel, 2019). Cars that are more than ten years old may generate up to 4.5% combustion products and up to 1200 parts per million of unburned hydrocarbons (Barrett & Therivel, 2019). This law has compelled Toyota Motors to reduce CO2 emissions from their automobiles via increased fuel economy, hybridization, and automation. Thus, the firm’s cars have culminated in a 627,939 metric ton reduction in total CO2 emissions and a 64.8 million gallon reduction in gasoline use in 2021 (Barrett & Therivel, 2019). Therefore, independent environmental legislations imposed by the various nations regulating gas emissions affect the daily operations of Ford, BMW, and Toyota organizations.
Free Trade and International Distribution Networks
Several nations have established policies to incentivize and expand their domestic vehicle manufacturing facilities. As a result, this will be a substantial transformation that will shape logistics services. There has been much discussion in the United States of America over the North American Free Trade Agreement (NAFTA) on the car industry (Hernandez-Trillo, 2018). NAFTA has benefited from the global auto sector’s linked structure, allowing manufacturers such as Ford to strengthen their distribution networks and produce more automobiles for the North American economy and export. As a consequence of the increased market, Ford Motors has raised its overall manufacturing, increasing sales.
The EU and Japan approved the Economic Partnership Agreement (EPA), an extensive trade treaty covering goods, offerings, and investments. This contract eliminates tariffs and non-tariff impediments and addresses other trade-related concerns such as procurement processes, legal requirements, competition, and sustainability. The EU-Japan EPA creates new prospects for EU businesses interested in exporting automobiles and components to Japan (Frenkel & Walter, 2017). EU exports of automobiles and components, such as BMW, have been deregulated and now enter Japan duty-free. Due to fewer protectionist measures resulting from this deal, the company has realized increased profitability. Similarly, Toyota Motors benefits from the same deal by being able to freely sell its automobiles and replacement parts throughout the EU, expanding its client base and so boosting earnings.
Company law is one of three pillars that comprise the environmental, social, and governance (ESG) sectors. Corporate governance examines how a firm employs rules and procedures to influence business choices, adhere to the law, and fulfill stakeholder duties. Each year, Ford is confronted with about 1,000 legislative proposals in state capitals that have the potential to affect Ford Company’s operations and bottom line (Karpoff, 2021). Its rivals often attempt to amend state legislation to acquire an unfair edge in the sale and service of automobiles; at other times, they propose new technology and innovative solutions. As a result, an unbalanced playing field exists, affecting the institution’s revenues. Ford works directly with state legislators to help design solutions and guarantee that all manufacturers compete on an equal footing.
Internal control is a cross-cutting concern for the BMW Group, including all facets of the business. Transparent disclosure and a company governance strategy oriented toward the needs of shareholders are long-standing BMW Group norms. Based on mutual trust and accountability, a collaboration between the management committee and the steering council has long been the bedrock of BMW Group’s executives. BMW’s corporate approach is founded on the ideals of openness, confidence in others, and accountability for one’s conduct (BMW Group, 2017). The BMW Group thinks that the German Corporate Governance Code’s rules and proposals contribute to the attractiveness of the German banking system, particularly for foreign investors.
Toyota Industries believes that the essential management duty is to win the complete societal trust and sustainably and long-term increase the company’s corporate value. The business intends to accomplish this mission by following its Fundamental Philosophy and diligently performing its social duties (Toyota Motor Corporation, 2021). The primary objective is to contribute to the enrichment of society via commercial operations, and the company feels it is critical to creating positive connections with all parties, including investors, clients, company associates, lenders, community groups, and workers. The business aims to strengthen its internal control to preserve and promote administrative effectiveness, fairness, and openness. Toyota, for instance, has built a structure that enables it to adapt swiftly and dynamically to transformations in the business context and has been trying to strengthen management supervision and guarantee prompt information sharing.
Automobiles are developed, manufactured, produced, advertised, and sold by various enterprises and agencies. Given the scale and significance of the car industry to many local economies, most governments are establishing legislative mechanisms to encourage manufacture, especially export assembly. Corporate governance is the study of how a corporation uses rules and processes to influence business decisions, comply with the law, and meet stakeholder responsibilities. Environmental protection has sparked substantial discussion about the car industry’s influence. Ford expects to reduce its carbon emission due to the enforcement of such strict laws by the USA legislators. BMW Group places a premium on so-called conflict minerals in its sustainability strategy. Tungsten is an excellent example since it is utilized in cellphone vibration alarms, light bulb conductors, and drill and cutting bits for commercial equipment used in the vehicle production process. Toyota Motors has been pushed by Japanese environmental rules to cut CO2 emissions from their cars via better fuel efficiency, electrification, and robotics.
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