Ford Celebrates, GM Scratches Its Head

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

Comments

[hoffman23:]

Why are you not accounting for the loan issues at Ford. Do you know that the "Blue Oval" is collateral for the bank loans? And how long did it take for the loan convenants take to unwind when they went to sell Land Rover and Jaguar? They have done a better job than Chrysler, but not better than GM. If there is federal help, you can easily expect Ford to be on that boat. Yes, they are optimistic about the new F series, but why are you ignoring two major issues? First, they held back this launch for 4 months due to 2008 inventory backlogs. And their dealers still have lots of stale products on their lots. And, of course, Who's lending their customers the money to buy this new vehicle? If you spent 5 minutes talking to a real "car guy" like me, you would know a lot more about this unique business.

2008 Nov 02 08:36 AM

[WPSPIKER:]

I think that (FORD F) will be able to come through this down turn just fine in the long run. I do think that they are still focusing on the US buyer as people that only want the large fuel guzzling cars. And as such has missed a great market share that could be very profitable to them. They have great market share abroad in Europe and S AM. as well as down under. They have been the best performing domestic manufacture as far as performance maintainability and fit/finish issues. nearly that of toyota and honda in the reliability department. With a bigger push to buy domestic I see that Ford will more than likely come out on top in the next 5 years. What they do need to do is get the Direct Injection ENGINES into market sooner, (yes they are re-vamping a factory to do this but 18months seems to be a far lead time for these little power houses.) Also they need to start looking into Turbo 4cyl cars more market visibility and bring over some of the High gas mileage cars that they produce in Europe, (see the 65MPG Ford) which was headlined back a month ago. These things are what is needed to keep ford moving forward. GM however has been behind the curve even farther. While they have a good market share in China. how long will that continue to happen when they have fallen off the map? I have not yet seen any numbers for last quarter for their high sales market share there... I do like the look of the New Chrysler Co.s vehicles, their fit / finish and more important reliability is deplorable. No one will want to buy a car that has so many issues right off the assembly line and even though they have a 100K mile warranty who in their right mind would want to keep taking the cars back to the dealer all the time for break downs?

While 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

2008 Nov 02 09:29 AM

[Miken:]

hoffman23:

How 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.

2008 Nov 02 09:32 AM

[Paul Killinger:]

To say that Ford is in better shape than its Detroit counterparts is simply another way of looking at re-arranging the deck chairs on the Titanic.

Anyone 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.

2008 Nov 02 11:02 AM

[Paul Killinger:]

It's one thing to be stuck with your past mistakes, we all make them. So Toyota and Nissan came late to the U.S. large truck market and are paying the price for it.

But 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.

2008 Nov 02 11:15 AM

[Paul Killinger:]

Anyone who doubts this thesis should simply consider these two questions:

1. 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.

2008 Nov 02 11:30 AM

[Paul Killinger:]

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!

2008 Nov 02 11:42 AM

[CaptainJJack:]

@Paul8756

The 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.

2008 Nov 02 01:39 PM

[IXLR8:]

Ford hasn't REALLY hired 1,000 new employees. It has merely pulled 1,000 people out of the JOBS BANK, where it is contractually obligated tp put people at full pay even if there is no work. (Read: Union Featherbedding)

Now, 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.



.

2008 Nov 02 05:12 PM

[charlyflies:]

Actually, no one is buying ALL the stock in GM or Ford because a) The current shareholders would want a substantial premium over its current stock price and b) The board of directors would vote on a "poison pill" that would prevent any potential investor from acquiring more than 5% of the shares. There is plenty of long term value in Ford

On 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!

2008 Nov 02 06:29 PM

[Deweyp:]

I am firmly convinced after reading these blogs for some time now that paulk8756 is in the foreign auto camp BIG TIME. This person has never had an unbiased or accurate comment since I have been reading and answering these comments. The US auto industry is doing everything possible to turn things around while at the same time being a responsible corporate citizen in the US. They are supporting employee and retiree healthcare and pensions at a level that provides a decent standard of living for them. None of the foreign transplants have this burden, having recently arrived on our shores, nor do the plan on doing so in the anytime future. Yes there are problems, but the big 3 are not abandoning those who have devoted their lives to these companies and are now living out their golden years comfortably, but not at the richness
level 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.

2008 Nov 02 08:46 PM

[briacal:]

I decided to buy additional shares of Ford last week.If Ford sinks I will sink with it; but happy to be with such honorable company .

2008 Nov 02 10:02 PM

[gooddog2:]

I just bought a new Ford, I now have four in my family and I am supporting an AMERICAN AUTO COMPANY. GM and Ford has helped make this country by having JOBS for how many millions of people, and for the spin off companies along with all the other jobs that provide those people with food, gas stations, stores, city workers, federal workers, and yes the very ones that don't want to help the companies stay afloat. What about the people in Washington D.C. that take the TAXES from all those people?

2008 Nov 03 03:15 AM

[Paul Killinger:]

Dewey,

I'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?

2008 Nov 03 09:44 AM

[Paul Killinger:]

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?

2008 Nov 03 10:12 AM

[Paul Killinger:]

That's right, you Detroit apologists. The ONLY new NGV for sale in the U.S. for the past three years is the Honda Civic GX. So is that my fault, or Detroit's? There are 7 million NGV's on the road throughout the world, but only 150,000 here. Give me a break!

2008 Nov 03 10:16 AM

[sumosama:]

doesn't ford still have two classes of common with vastly different voting rights???

2008 Nov 03 11:27 AM

[31October:]

Only daytrader should invest in Ford:
Ford 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.

2008 Nov 03 12:20 PM

[akenny63:]

I would love to buy a small NGV with a pump that I could fill up from my home gas supply. I used to see Ford auto plants durability testing engines with natural gas. I suspect the conversion would be simple.

As 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?

2008 Nov 03 12:44 PM

[IXLR8:]

To October31: Ford ceased paying a dividend in 2006. Not paying one has cost the Ford family dearly. Bill Ford, CEO, has not drawn a salary for five years, and, when he earns a bonus, he donates the whole thing to fund college scholarships for dependent children of employees, both hourly and salaried.

Also, 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?

2008 Nov 03 10:25 PM

[Benito Camela:]

IIf you want to be long Ford, buy the convertible preferred that trades in the NYSE (F-PS in yahoo finance, trades at $7.1 per $50 of face value). It has a +40% current yield and you will benefit if the stock goes up. If you are wrong, then you are senior to stockholders.

2008 Nov 04 06:31 AM

[Maximus:]

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.

2008 Nov 04 09:44 AM

[Jobu37:]

You will get your wish in about a year and a half. The Fusion will be moved to the same platform as the globally praised Mondeo.


On 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.

2008 Nov 06 06:27 PM