After wave upon wave of layoff notices and factory closures, Ford (NYSE:F) employees are celebrating a re-hiring event. Thanks to Ford re-starting its 2009 F-150 truck line, nearly 1,000 workers will be stamping their time card.
Ford is making a risky move. After all, its truck sales were down 27% last month and many experts say we have yet to reach a bottom in the industry. But company executives see a profit opportunity.
With one of the best-selling product lines in the history of automaking, Ford believes it must concentrate on the profitable line if it wants to ensure future success.
Officials insist that pent-up buying demand created from the credit-industry freeze is growing and truck-buyers will flock back to showroom floors over the next several months. After all, many businesses depend on reliable pick-up trucks for their daily operations.
As investors, we need to look at today’s news as less of a human-interest story and more as an in-depth look at the company’s financial situation. Ford’s willingness to put another thousand names on its payroll roster proves its short-term liquidity and its long-term odds of success.
When General Motors (NYSE:GM) and Chrysler are begging for merger assistance in a last-ditch shot at success, Ford continues its transition into a leaner, smarter manufacturer.
As of their last earnings reports, Ford had nearly twice as much cash on hand as General Motors and its operating cash flows were nearly $10 billion higher. Ford’s liquidity issues are miniscule compared to GM’s problems (see Ford's conference call transcript here, GM's here).
Even with Ford’s outlook significantly brighter than its Detroit counterparts, its share price has been drug into the mud. Over the last twelve months, shares have dropped by nearly 75%. General Motors, with a much smaller shot at survival, has seen its shares fall by 85%.
Fortunately, Wall Street is realizing Ford is worth more than $5 billion. Over the past five days, share price has risen significantly. And investors that followed my buying recommendation on Monday are now sitting on gains of nearly 20%.
Fortunately, shares of Ford will continue to rise. If you do not have any shares of Ford, now is the time to buy.
Detroit’s hopes of success are rising with every passing day. As more and more cries for industry assistance hit Washington, the likelihood of a significant bailout increase exponentially. Even if you think it is too late for General Motors, do not toss Ford into the same category. It is much better managed, has far greater financial stability, and its products are still in demand.
Take a look at shares of the company and see if they meet your investing criteria.
Disclosure: none
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This article has 23 comments:
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hoffman23
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21 Comments
Nov 02 08:36 AM-
WPSPIKER
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6 Comments
Nov 02 09:29 AMWhile I'm not as much into markets and such I am into cars :) I figure that the GOV will probably have to step in and help out the AUTO industry I don't think "Cerberus" Executives/hedge fund people should benefit any or the UAW which has helped to put all of the big 3 into this predicament. While getting a loan has not been easy the last year actually being able to pay the loan may get worse for much of the people which is why the Car industry as a hole has slumped 25+% in the last quarter. If/when the one candidate wins this presidential race I'm thinking that there will be little help for ANY big business. History tells us that High taxes on everyone (not just those making 250K or more) is in short order as well as a large push to increase tax on dividends/earned income and any net profits. This spread the wealth sounds great if you don't work for a living so maybe you should spend all the money you have now and figure that he will give you more...
Mark
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Miken
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48 Comments
Nov 02 09:32 AMHow can you criticize someone with a "no-nonsense writing style and sharp, deep-thinking analysis."
Honest to Pete, where does Seeking Alpha find these guys? Not one of them has a clue what he's talking about. Typical financial 'analyst'...they absolutely depend on guidance from companies because they clearly can't figure it out for themselves.
I'm with you hoffman23.
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Paul Killinger
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1015 Comments
Nov 02 11:02 AMAnyone considering investing in Ford should think long and hard about the wisdom of that after this announcement. Even if they still have the credit, who's dumb enough to pay what they're asking for a new truck while they're being given away on the resale market? Not to mention existing trucks are worthless as trade-ins.
This new Ford entry comes on the heels of new Hummer and SUV models having been introduced by GM. Detroit's automakers must be living on a different planet than the rest of us.
Giving them more taxpayer money to restructure themselves is a fool's errand. The only move left that makes any economic sense is to force them into bankruptcy.
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Paul Killinger
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1015 Comments
Nov 02 11:15 AMBut you don't see them expanding these lines or bringing new models to market, do you? Of course not. The definition of insanity is doing what you've done previously and expecting a different outcome.
The only idiots stupid enough to throw more good money after bad at Detroit are the politicians in Congress. And even they know better. They're just buying votes with it.
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Paul Killinger
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1015 Comments
Nov 02 11:30 AM1. WHERE are the high quality best selling compacts GM and Ford offer car buyers in Europe and other countries? I don't see them.
2. HOW ABOUT the NGV's they sell in Canada and other places that Boone Pickens is spending $60 million to advertise for them? There are 7 miilion of these on the road throughout the world, but only 150,000 in the U.S.
Oh, no. All we get is the promise of the $45K Volt someday with a range of 40 miles. I would think you Detroiters would be besieging the Congress to END this stupdity and START OVER instead of begging for more bucks to keep this folly alive awhile longer.
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Paul Killinger
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1015 Comments
Nov 02 11:42 AM-
CaptainJJack
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26 Comments
Nov 02 01:39 PMThe one thing I can assure you is that Ford understands where their future lies.
They are spending BILLIONS of dollars converting three truck plants into car operations. The WHOLE POINT of Mulally's world platform is to get more fuel efficient, competitive cars into the US.
The main problem with NGV is size and range. You either have bigger vehicles, or they do not go as far, and that is why even Boone Pickens is pushing replacing the truck fleet with natural gas, and not the car fleet.
The ultimate vision at Ford is electric vehicles, but the battery technology is not good enough yet. The batteries are too expensive and they do not have the range.
The decision to start up the truck line is a pretty simple one. You have idle capacity and elastic demand. EVERY truck they sell over their marginal cost reduces the loss.
It is a no brainer. Further, there will ALWAYS be a truck market even if it is much smaller than now. Again, Ford understands the realities.
Mulally had geared Ford for a 14% market share in a world of 14 million cars sold in the US. They now see are world of 10 to 12 million cars, at least in the short run, and they have adjusted production.
The one thing Ford did that the others did not do was go out in 2006 and 2007 and borrow as much as they could possibly borrow. This was as much due to the fact that Ford people view themselves as car people, not finance people, and they want to get the money issues out of the way so they could focus getting the cars right.
In a normal world, Ford would be thriving right now, as they were last year before the downturn.
Right now, though, the future is not as much in their hands as it is in the hands of the economy gods.
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IXLR8
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26 Comments
Nov 02 05:12 PMNow, the good news is that Ford will get something out of these guys, instead of just paying them to sit on their cans and play cards.
The bad news for the unions guys is that they will have to actually do some work in exchange for the money.
.
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charlyflies
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1 Comment
Nov 02 06:29 PMOn Nov 02 11:42 AM paulk8756 wrote:
> Or you can look at it another way. Since someone could buy ALL the
> stock in GM or Ford for a couple billion dollars, how come there
> are no takers? Because anyone with that kind of money (with the exception
> of the Wall Street geniuses named Cerberus) has better sense. That's
> why!
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Deweyp
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11 Comments
Nov 02 08:46 PMlevel that some would have you to believe. The efforts of these companies deserve our support, not our disdain. They should in fact be honored for what they are trying to accomplish. Paulk 8756, I find your extreme bias against the US auto industry SO reprehensible and SO entirely inaccurate that you should be censured or banned from commenting on the web sites Seeking Alfa provides.
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briacal
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31 Comments
Nov 02 10:02 PM-
gooddog2
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3 Comments
Nov 03 03:15 AM-
Paul Killinger
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1015 Comments
Nov 03 09:44 AMI'm sorry you feel the way you do about my comments. Sure, I'd like GM and Ford to build better cars and manage their businesses with greater competence, just like you would. But for a wide variety of reasons (tradition, management, unions, taxes, government mandates and inane regulations to name a few) they don't.
So the question occurs, what are we as taxpayers (who are turning out to be their owners of last resort) to do about this? Should we simply go on giving them more tax dollars (yours and mine) while they incur ever greater losses? What if we did that for all industries in their predicament, where would that leave us? Could our nation survive propping up all the corporate losers in our manufacturing sector?
Or should we say at some point that these companies as they're presently constituted simply aren't going to make it, cut our losses and start over? Given a fresh start, maybe the "new" automakers that replace these aging industrial giants could flourish (like our nation's steel industry has). Wouldn't we all be better off then?
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Paul Killinger
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1015 Comments
Nov 03 10:12 AMGM and Ford both built NGV's (trucks, vans and cars) in the U.S. between 2000-05. They still sell 19 such models in Canada alone. Right now Ford will convert the new Ford you bought to run on LNG for FREE if you live in Germany.
There is NO logical reason why Detroit doesn't offer NGV's for sale here. Since NG costs 40% less at the pump than gasoline, this would revitalize their obsolescent trucks and SUV's. They could refuel them at their dealerships, thereby helping keep them in business, as well.
Since this obviously must be a conscious business decision on the part of Detroit, then, we must ask ourselves why? The only answer I can come up with is they're looking for additional government handouts to build NGV's again. If this is so, they deserve to go bankrupt. Today!
As regards EV's, they've been around since 1909. And they make no more sense now than they did then. They are still beset by the same technological barriers they've always had, namely poor BATTERY performance. The much touted Chvey Volt will sell for about $45K, including its $15K replaceable battery pack. It will have a range of some 40 miles between rechargings. So let me ask you, would YOU buy one?
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Paul Killinger
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1015 Comments
Nov 03 10:16 AM-
sumosama
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237 Comments
Nov 03 11:27 AM-
31October
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49 Comments
Nov 03 12:20 PMFord has a ton of better product in the pipeline and a corrcted vision for the future. However...
1. Detroit/Dearborn unions. Thousands of people moved down here to get away from them. If you refused to strike/slowdown, you got a brick through your window. Ford cannot complete with BMW, Nissan, Hyundai, Mercedes, or Honda plants with better and simply nicer workers anywhere else in the nation.
2. Reliability & durability. There have always been more Ford trucks sold, yet more GMs are still on the road. They last longer. My GMs ran badly long after my Fords quit running at all. Now, GM has moved ahead of EVERYBODY in reliability. Ford has not. Chrysler is so bad that they suck the good parts off of passing cars, but I digress.
3. Nobody except the two posters on this page gives a rip about an American brand. My Honda and Nissan are American cars built in the USA, one by my American relatives. My American neighbor lets me drive the American-designed and built experimental cars [580HP!!!] from the "Bavarian" company down the street. Ford destroyed themselves; they do not deserve consumer sympathies or subsidies for having created jobs 100 years ago. How many did they create this decade?
4. The Ford descendents will never cut the dividend or risk their controlling stock shares, even if they could fix the debt ratio. They would let Ford die before thinking long-term. Fords could kill Ford.
Daytraders, have fun with F.
Long-term growth investors, keep running until you can run no more.
Disclosure: I hope I am wrong.
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akenny63
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2 Comments
Nov 03 12:44 PMAs for quality, my opinion is that Ford has always taken it more seriously than GM or Chrysler. My son-in-law recently had a problem with a Chrysler that was still under warrenty. The dealer told him that it was a parts problem that they would cover, but he had to pay for the labor. Bring your lawyer if you are going to buy a Chrysler.
On Nov 03 10:12 AM paulk8756 wrote:
> Captain,
>
> GM and Ford both built NGV's (trucks, vans and cars) in the U.S.
> between 2000-05. They still sell 19 such models in Canada alone.
> Right now Ford will convert the new Ford you bought to run on LNG
> for FREE if you live in Germany.
>
> There is NO logical reason why Detroit doesn't offer NGV's for sale
> here. Since NG costs 40% less at the pump than gasoline, this would
> revitalize their obsolescent trucks and SUV's. They could refuel
> them at their dealerships, thereby helping keep them in business,
> as well.
>
> Since this obviously must be a conscious business decision on the
> part of Detroit, then, we must ask ourselves why? The only answer
> I can come up with is they're looking for additional government handouts
> to build NGV's again. If this is so, they deserve to go bankrupt.
> Today!
>
> As regards EV's, they've been around since 1909. And they make no
> more sense now than they did then. They are still beset by the same
> technological barriers they've always had, namely poor BATTERY performance.
> The much touted Chvey Volt will sell for about $45K, including its
> $15K replaceable battery pack. It will have a range of some 40 miles
> between rechargings. So let me ask you, would YOU buy one?
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IXLR8
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26 Comments
Nov 03 10:25 PMAlso, it's a lot different buying a car assembled in America versus one made in America--engineering and manufacturing of components and the overall vehicle employ a lot more people than mere assembly.
Ford may wish to avoid unions if they could, but governments keep getting in the way. Should Ford raze all its factories in the states that require union membership to relocate to "right to work" states? What would be the short and long term cost of doing that?
Also, how does Ford get rid of its "excess" dealers when federal law prohibits them from closing ANY dealers, even including the lousy ones?
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Sr. EM
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12 Comments
Nov 04 06:31 AM-
Maximus
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9 Comments
Nov 04 09:44 AM-
Jobu37
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10 Comments
Nov 06 06:27 PMOn Nov 04 09:44 AM Maximus wrote:
> If Ford sold it's European Mondeo in the U.S. I wouldn't hesitate
> to buy it. It is much more appealing that any other car in their
> U.S. showrooms.