According to The Detroit News, Ford has the second highest research and development (R&D) budget of any company in the world. That's not the second highest in the auto industry. That's the second highest R&D budget of any company in all industries. Ford's $8b R&D budget is second only to Pfizer's, higher than Microsoft's or Johnson & Johnson's. The second place amongst automakers falls to Daimler (formerly DaimlerChrysler, née Daimler-Benz) with a $7.34b budget. The total places it as Europe's biggest spender– but only seventh overall. So let's see… what are we getting from Ford's massive investment in R&D? There's a "new" Taurus which is a Five Hundred with a blinged-out grille, a "new" Focus that's based on an eight-year-old platform, an entire brand that's nothing more than rebadged Fords, and a "luxury" car brand with a 10-year-old flagship model sitting on a 30-year old platform. Yep. Sounds like money well spent to me.
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Most of the R&D budget must be going to Ford’s European operations. They DO have something to show for it.
Amazing with a budget like that Ford should have flying cars out by now, at least the most advanced cars on the planet. Instead you get a burecratic money wasting mess with platform sharing that doesn’t allow them to share a single thing. Genious at work.
When I try and think about it, 8 billion dollars is pretty much all the money in the world. It is pretty shocking to think about all those resources going into the new Focus. I wonder if they have a $400 million fender vent budget.
Money isn’t going to solve the problem; it’s overwhelmingly evident that investment isn’t the problem, allocation and bureaucracy keep customers puzzling as the what compelling reason cars like the 500/Taurus and Focus present for purchase.
This is a refreshing change; they cannot introduce new and innovative products without R&D. Of course they may still have an equivalent beancounter budget to offset any possible gains made by the R&D group.
How about a little R&D on the panther platform? Or just enough to move the EuroFocus to America?
You should see all of the excel spreadsheets and powerpoint presentations you can get for $8B.
You gotta think they could save a lot of that money by going grassroots with their market research. Poll their target demographics on what is most important to them, then cater to them. Find out what will sell, do R&D, and produce a world-class car.
What are you all talking about(?) Ford’s cars are lovely(!) The Euro Focus which handles like tank, has interior plastics cheaper than a recalled chinese toy washing up bowl and styling so half arsed they couldn’t decide between a htachback or a coupe so decided to have somewhere in between!
What about the new Mondeo? Puhleeeze!
This is another reason why Ford are going down the toilet. Huge R & D budget and very little to show for it.
Katie:
I was looking my Civic (’05 LX coupe) over the other day, and I am starting to understand more what you mean about the interior disparity. On a $14,900 US (new), it has soft-touch dash material. You can’t get that on a Charger R/T, but you can get a Hemi. I cannot cost that much more to upgrade interior materials.
Wasn’t money saved during all this cost cutting going INTO their R&D budget. How is this going to save Ford’s future if money is already being burned in huge piles in this department, more money for the fire. They are so doomed and don’t even know it.
As a top line number, it’s meaningless.
It all depends on what they classify as R&D.
Microsoft has a massive R&D budget, if you pull back the curtain on the numbers, it’s actually just programming for Vista and Office, not pure research. It looks good in the annual report, and they brag about it to clients, but very little new technology escapes from that sinkhole. It’s just regular software development classed as R&D.
Lots of companies classify ordinary expenses into R&D for tax reasons. I’d imagine that is what Ford is doing to account for the bulk of the 8 billion number. It certainly is not invested in major product improvements.
you forget they own mazda, volvo, land rover and jaguar- id say they have a lot to show for it–there own diesels designs(not Cummings),a redesigned rotary motor-a rotary also that runs on hydrogen and gas, and more if you spend any time reading on cars .they have restructured and if i was ceo id do the same thing-spend all the money on r&d and hope it pays off.
I bet a large of of it is going on R&D on how to make Field’s hair even crazier, in order to outdo Trump.
stuntnun, Ford may build some small car diesels of their own, and I “think” there is a Land Rover V8 diesel either planned or in production now, but the Ford pickemup truck (as in “cowboy trucks” for ‘merca) is actually not theirs, but “bought in” from an ex-competitor, International Harvester. (IH quit the truck biz in 1975 and quit the SUV biz in 1980 – talk about bad timing – and Ford quit the heavy truck biz awhile back, so they no longer compete at all).
There has always been something out of whack with Ford’s cost structure. They spend way too much money on everything.
I remember years ago when they came out with the Ford Contour, Mercury Mystique, and Euro Mondeo. They spent 4 or 6 BILLION (sorry can’t remember which, but I’m leaning towards the higher number) developing those cars (in mid 90’s dollars!).
Meanwhile Chrysler created (using Honda’s development methodology) the equivalent 1st gen Dodge Stratus, Chrysler Cirrus, and Plymouth Breeze for just 1.3 billion. Most critics rated them better overall (some thought the top of the line trimmed Ford handled better, but in all other categories, ergonomics, comfort, visibility, room, trunk space, and pricing, the “cloud cars” won and made C&D’s top ten list.
Now to be fair, the Ford costs included a new engine and trans I believe but still… Someone at the time wrote that even if they sold 400,000 a year in North America and Europe, they would never make their money back.
I wonder how much of that R&D came from Volvo.
Everything from whiplash-killing headrests to entire cars come from a Volvo blueprint.
hey glenn im in the usa and they are in the diesel design still -its a very good diesel, i think its rated 350,000 miles till a rebuild-its built in house-just go to there web site or search diesel designs ford-tells ya the whole history—i forgot to add that bush signed a bill a couple years back for the big three to get tax cuts for the development of alternative fuel designed motors-i bet a good chunk of that money will be written off if its got anything to do with better gas mileage
I figure the major areas of R&D Ford is investing so heavily in is golden parachutes, buyouts, and ways to diminish the effect of the UAW.
They spent 4 or 6 BILLION Seriously, that is astronomically high. I thought the average cost for a clean sheet design incuding new drivetrain was about $1billion to 1.5, with platform sharing spreading the cost out over a few models.
Does anyone know how the Ford/Mazda partnership is structured? I think Mazda has an independent R&D budget and they just share components and engines. Doesn’t Ford re-engineer Mazda platforms and engines for use in NA Ford products.
Redbarchetta: i have a mazda 6 six cyl. its a ford duratec block but mazda head pistons and internals ,volvo brakes–the new fusion, milan and lincoln zypher are basically mazda 6s- this criss crossing of parts and chassis is common in all ford owned car companies -they own enough of mazda they can say no or yes to what they can do.
they do have some of the most advanced cars on the planet–ford gt500 will smoke anything in that price range-the rx-8 and miata will out handle and outbrake any thing in that price range(solstice is close) and the mazda 3speed will out handle ,brake and accelerate any thing in that price range–some people need to read up on the cars.
$8 billion and they couldn’t launch the Five Hundred with a new power train?
stuntnun:
Since when is the GT 500 better than the Corvette, in any way? It is not “advanced” as much as it is a bigger engine than normally comes in a muscle car. It is nose heavy and handles worse than almost any car in its class.
I can’t argue with you on the RX-8 or the Miata. If they would infuse some of their handling dynamics into the Mustang, the story would go differently.
Ford hasn’t done anything more than sell nostaglia in recent memory.
Ford once spent $1B on a software package, for tracking various metrics, that wasn’t implemented.
stuntnun The GT500 is nothing truely advanced just a tarted up Mustang which wasn’t very technically davanced to begin with.
Ford only has a 33% ownership in Mazda as opposed to 100% for Volvo, Land Rover and Jaguar. I have a feeling Mazda spends a good portion of their own money on R&D and doesn’t just get all the money from Ford.
I guess your right though Mazda has some pretty great stuff(engineering & design), and their sales show it. Ford not so much.
A point to be made: Ford has been spending huge amounts in what they classify as “R&D” for years now, yet they have little to show for it, and that includes Ford’s European lineup.
Either Ford is being very inefficient with it’s funds and is wasting a lot of money, or Ford is simply not spending all that much on R&D and is listing various other expenses under the “R&D” category.
I would guess though that a big chunk of Ford’s R&D spending goes into trucks.
One thing not mentioned by the article is that Toyota also has a sizable R&D budget.
The article also did not mention trends, where companies like Ford and Chrysler are in a trend of reducing funding, while companies like Toyota and VW are increasing their R&D funding.
“It’s just regular software development classed as R&D”
Routine product development is indeed part of the “D” in “R&D”. R&D covers the entire range of activities from non-product-specific research through product targeted research and all the way down to routine development. Nothing sneaky about it.
“hey glenn im in the usa and they are in the diesel design still -its a very good diesel, i think its rated 350,000 miles till a rebuild-its built in house”
BZZZT, not. Current Ford USA diesels are built by Navistar and in fact the two companies have been in court recently suing each other over terms, conditions, pricing, warranties and such. Navistar is also suing Ford over the planned F-150 diesel due in a few years which Navistar claims they have the agreement to supply and which Ford seems to be looking to modify a Land Rover engine for. Ford might end up building it’s own US market diesels in the future, but presently does not, no matter what hype Ford tries to put out on it’s website.
http://www.ford-trucks.com/news/idx/9/334/article/Navistar_Files_Lawsuit_against_Ford_for_Breach_of_Contract_Involving_Diesel_Engines_for_Ford_F150_Pickup_Trucks.html
http://www.topspeed.com/cars/car-news/super-duty-lawsuit-over-the-ford-super-duty-ar37309.html
“Ford might end up building it’s own US market diesels in the future, but presently does not, no matter what hype Ford tries to put out on it’s website.”
Ford doesn’t claim to produce its own diesel engines in the U.S. It does however have a hand in designing them and is currently modifying an LR/Jag 3.6V8 into a 4.4V8 for the U.S. The lawsuit over Ford’s supposed breach of contract with the upcoming 4.4 has now been thrown out as well.
Ford’s R&D budget is very poorly spent. Why? Dangling platforms. Dozens of them. As Mulally and Fields realign R&D, there will be much better return on the spend naturally, but Ford is not without its fruits.
FoE has a phenominal line-up of designs and engines. However, the money spent last year and this year would be for things like: DSG tranny debuting next year, Ford’s U.S. diesel dev, the F-150 overhaul, their GenII hybrid system that debuts in L.A., their hydrogen work, their ethanol work, their plug-in hybrid work (all stuff that comes out over the next several years) and, yes, the new cars that are popping up like the Mondeo, Focus (Euro and U.S.), Taurus, Kuga, XF, C30, etc. etc.
Once platforms are aligned, however, dangling work like the U.S. Focus will be eliminated (or, really, greatly reduced). As Ford reduces from seven to two V6’s, extra investment there will be eliminated (etc).
The new Focus, by the way, is a wonderful driver. I got to rent one over the weekend, and was thoroughly impressed at its NVH, interior and handling. It was an SES, by the way. It’s definitely competitive with the Civic in NVH and a much better handler and feels more powerful. The interior is actually really nice (everything felt very substantial and put together well). The exterior would look better without the stupid vents. It doesn’t feel or sound at all like the old C170. It feels more like the Mazda3 even if it isn’t your beloved C1.
There’s a big difference between R&D and just R.
Pure research is what results in things like Toyota’s hybrid system, Volvo’s anti-whiplash seats and headrests, etc, etc.
The D of R&D is just that – development. Developing a new car on a 30 year old platform is development. It might be worthless, but it counts in the tally.
Now, D is important, it’s the D that Toyota and Honda do that relentlessly improves each generation of their cars. D does not include operation expenses like manufacturing.
R is inventing a hybrid system. D is engineering the hell out of it to drive the costs down, down, down to the point where Toyota claims that the hybrid system in the next Prius will add only about $1000 to the cost of the car. So, both R&D are important in what the consumer sees in the end product.
Ford’s just using this as a PR puff piece. Still, regardless of the R v D breakdown, that $8B works out to $21 million per day. Nearly a million dollars an hour. That’s a lot of $$. Ford should have more to show for it.
RyanK02-the gt , its engine is in the back-its not nose heavy -thats usually in front wheel drive cars and its called under steer(the gt has gobs of over steer) – i think you get more bang for your buck in a corvette–but as an investment the gt 500 will go up in price-its not meant to handle like a miata or even an evo==its taking on lambo s and Ferrari’s. ps im not talking about the shelby stang
http://en.wikipedia.org/wiki/Ford_GT
They spent most of that money researching bankruptcy law.
stuntnun RyanK02-the gt , its engine is in the back-its not nose heavy … but as an investment the gt 500 will go up in price Yes, the Ford GT's engine is in the back. However, the GT 500 is a tarted up Mustang and is very much front-engined. And front-heavy. It may show slower depreciation than other Mustangs, but it'll be many years before it'll show a return on investment (if it ever does).
perhaps the strategy is to declare bankruptcy, and then under protection, launch a new generation of supremely competent global cars.
snicker
Ford’s $8-billion R&D budget isn’t evident in its products. I would be looking for a forensic accounting firm.
sorry i posted messed up-i never meant the mustang at all- just the gt-i dont like the mustang,or any muscle car, there only good in a straight line and thats very boring after a while.
Ford GT Ummm that car is out of production, probably because Ford realized they don’t compete against Ferrari for survival they compete against GM, Toyota, Honda, etc. They need to be spending money on the mass produced cars to make them the most advanced not the Jay Leno specials.
FYI I did some digging into this info and found some spreadsheets with a breakdown by company. The numbers are EU millions, convert for USD.
Ford= 5,459.96
Mazda= 609.26
Volvo= 1,249.06
I couldn’t find Jaguar and Land Rover broken out seperately. So if all that money is coming out of Ford’s pocket they are spending way more than $8billion more like $11billion.
Here is the link incase anyone wants wade through the speadsheets.
http://iri.jrc.ec.europa.eu/research/scoreboard_2007.htm
“Lots of companies classify ordinary expenses into R&D for tax reasons.” More likely the other way around. R&D is often capitalized, like the purchase of a machine, and written off over a period of years through charges to depreciation/amortization. Also, Ford is, to put it delicately, not in need of more tax writeoffs right now.
The internal dynamics of organizations, especially those as desperate as Ford, do favor classifying ordinary expenses as R&D. Each unit is fighting for budget and power; those that promise a better future will be more resistant to cost-cutting than mundane activities. So yep, a lot of “spreadsheets and powerpoint presentations” may have got called R&D.
In addition, Ford has operated as a collection of competitive fiefdoms. Thus, for example, dozens of seat rail designs were R&D’d. Mullaly must often shake his head and wonder, “How did this outfit get so dysfunctional?” (Partial answer: weak top management, such as Bill Ford, who couldn’t bring himself to compel the kids in the sandbox to play together nicely.)
As someone who works in R&D (not in the auto industry), you’d be surprised about 1) how much money is spent and 2) how much cool stuff we figure out, but never makes it to product. At least Ford has a big R&D budget, the next step is the hard part: turning that R&D into product.
I find this hard to believe. With that much money Fords has in its R&D, you would think that the vehicles coming off their assembly line would be of highest quality and latest technology. But that is not the case. The vehicles barely meets the minimum requirements. Am I missing something here. $8 billion “WOW”
We get our monies worth in Australia, a standard large car is highly durable, can cover large distances on poor roads before major work needs to be done ( 250 000 klms or @ 150 000 miles ) it has a class leading inline 6cyl engine with optional turbo charging on some models ( Plus Liquid gas option, and two V8 engines) as well as electronic stability and multi link rear suspension. To compare to a toyota that uses old technology and is out of class when it comes to driving dynamics. The build precision, quality of components and drivability leave the Japanese car for dead. The large car Ford Australia call the Falcon has been around for decades as a locally designed and manufactured car. Currenty Ford offer a sedan in 5 Equiptment levels with four engine options. two Wagons with two equiptment and engine options and a two utilitys, one a “Rugged Terrain Vehicle with three engine options from two body styles and option for three different transmissions, also the regular utility has two body styles, four engines and three equiptment/tuning options. From the Falcon, Fords partner ship with UK tuning company “Pro-Drive” gives us FPV (Ford Performence Vehicles) they have 14 different Falcon based high performance models. All this for a tiny little market like Australia. The vehicles are engineered for local conditions which can be very hard on imported vehicles designed for better roads. Our local models have proven themselves as Family and Goverment/Business/Police vehicles and Fords Local branch has stayed with such models as large family wagons ( or Estate ) when others have dropped it. They have even designed and built a class leading suv, the “Territory” that comes close to an X5 BMW in driving dynanics and is a true suv in that it fulfills the s for sport. Ford are engineers and they will always play with a model upgade, even if it looks the same the new model will have had millions spent on redesigning components. Anyone who asks alot from their vehicle will be in a Ford, if Ford were not keeping pace with tecnology then their cars wouldn’t keep pace with their high usage, high work-load customers. You only need to look at what has been accomplished with the focus chassis to see how advanced Ford are, what does toyota give us in this area? a low grade car that feeds of a myth of build and reliability that is years behind a Korean car in design ( I hope the USA doesn’t soften the Focus suspenion to much, the Euro tune is unbelievable!). The global average mileage per unit of a Ford will be much higher than any other manufacturer, this should be reflected in realistic resale data and quality suveys. GO FORD! YOU MAKE AN HONEST CAR AND YOU KNOW ITS ALL ABOUT “D R I V I N G”!
“As Ford reduces from seven to two V6’s, extra investment there will be eliminated (etc)”
The amount of waste in the Ford way of doing things over the years is just nuts. For years they made two different small block V-8 engine designs, one the “Cleveland” and the other the “Windsor” depending on which factory built it. On many models they were used interchangeably in production. Spare parts were different, repair procedures different, etc. It has always boggled my mind as to how Ford gets itself into these messes. How on earth the modern Ford company let itself end up with so many platforms and so many overlapping parts is a real mystery to me. I guess that top management simply wasn’t doing it’s job and was letting every little fiefdom do it’s own thing.
Recently I went looking for good used OE replacement speakers for my old F150 truck. You would think that common round speakers would have been shared between the truck and the Ford sedans of that era, but nope.
The amount of savings to be had from rationalizing the product lineup is huge. Hopefully Ford also will stop wasting money on stupid projects like the Thunderbird, GT and Lincoln Blackwood.
In a way Ford has made it’s problems even worse with the acquisition of European brands. Not long after they bought Jaguar the management there convinced Ford that it would need to develop a complete new V-8 engine of it’s own. That engine family ended up going into the Lincoln LS also. More recently Volvo wanted a V-8, and contracted with sometimes Ford supplier Yamaha to make them one, which engine is completely incompatible with the Jaguar V-8 and other Ford V-8s.
they should have stuck with just one luxury brand, and no more. Volvo would be perfect. Drop everything else.
to jthorner : i agree the blackwood was weird,i dont get who it was aimed at-70 year olds that wanted bling on a pickup? but the gt wasnt wasted,they get to take new technologies and apply it to the road,and what works trickles down into other vehicles(brakes,rubber,materials,fuel maps ect..)i know it stopped production but now theyre developing or maybe its out-the 60s version of the cobra (not mustage -the shelby aluminum body one)I cant believe im defending ford cause they do produce a lot a crap too. by your argument wouldnt 2 small blocks (windsor and cleveland) be enough choice back then? they were compatible in most fords that had a v-8.car manufactures try to make it so they can share parts across platforms,if they didnt the car would cost alot more especially a low volume car.i think nissan offers the same six cyl. in every model almost.
Question. How much of that R&D is publicly subsidized?
The lowest estimation of Pfizer $9 billion R&D budget being publicly subsidize is 40% and that’s the lowest. It could be as high as 80% when you work out how much they spend on actual research of new developments/products. The last I checked Pfizer profit was about $8 billion, which is funny when the public could be footing up to $7.2billion in R&D alone not including massive tax cuts.