The Stock Masters submit: The Ford Motor Company (F) is an institution as American as apple pie. They marked their 100th anniversary in 2003, in 1903 Henry Ford and 11 investors founded the company with $28,000 in capital and sold its first car in Detroit.
In 1903, $28,000 is equivalent to roughly $600,000 today, so keep in mind they invested a great deal at the time and took a chance on something they believed in. It was one of the first American dreams come true, the creation of the 'assembly line' implemented in 1913, the Model T, Thunderbird, Lincoln Continental, Mustang, and let's not forget the Ford Pinto, not their best moment but one to reflect on none the less.
In 1978 the Department of Transportation announced that the Pinto fuel system had a "safety related defect" and demanded a recall. Turns out, if you rear end a Pinto at 30 MPH, well..a picture is worth a thousand words:
Ford agreed to the recall and on June 9, 1978 the company recalled 1.5 million Pintos (I cringe thinking about the actual number of fatalities and burn victims it took to make that happen). I had a green "Poison" Pinto matchbox car as a kid, no one ever burned in it, but I did set it on fire when I was 10.
In 2006 the Ford Motor Company is doing everything in its power to not get burned, it's been a tough battle, and the hard part has yet to come.
Ford is responsible for the following brands:
In recent years Toyota (TM) and Honda (HMC) have set the standard and are now the major players. When you are stuck in traffic or walking through a shopping mall parking lot, I guarantee you see more foreign cars then American.
In April 06, Ford had its worst quarterly results in four years; they posted a loss of $1.2 Billion for Q1 06. Two weeks ago they announced they were cutting Q4 06 production by 21 percent and temporarily shutting down 10 assembly plants due to declining pickup and SUV sales. In January, Ford announced they will be letting go 25,000 to 30,000 employees and closing the doors to 14 plants by 2012. You can't help but think, to little too late Ford.Why would American's keep buying bigger cars? I couldn't believe the latest fad with the Cadillac Escalade or any of the Hummers (H2 or H3); nothing but a status symbol. But the big car fad is over.
American's got realistic about how much they were willing to pay at the pump and how if affects their pocket books. Why Ford didn't invest early in hybrid engines and efficient cars like Toyota and Honda have is beyond me. The Smart Car can be seen in every city in Europe, it's now trying to gain market share in America. Zap (ZP), maker of the Smart Car has had a terrible time over the past three years trying to get approval from our government to sell their cars in America. Zap also has struggled with converting Smart Cars to American standards in a partnership with DaimlerChrysler that has ended in the court room. In November, Zap filed a lawsuit alleging that DaimlerChrysler has attempted to keep them from converting Smart cars for the U.S. market.
Ford is losing ground to the Toyota Prius, Honda Civic Hybrid, Scion wagon, Mitsubishi Lancer, Hyundai Sonata, and the list goes on and on. I believe Ford will survive, but it's more hope than an actual belief, can you imagine the day when Ford closes its doors?
It would be a very sad day for America, and I think the powers that be will not let that happen. Consider Ford shares have been trading in the high $7 to $8.30 range for the past six months, their P/E is -12.34 and they have a market cap of $15.37 billion. The fundamentals are a nightmare and with all the bad press, this is either a time to buy the stock, or stay away for good. Maybe Ford should try and bring back the Pinto, imagine what the new Ford 2007 Pinto could do to the company. If they fixed the exploding gas tank problem, they might just have a winner on their hand, spice it up and get Paris Hilton on the Ad:
F 1-yr chart:
Article written by Ben Stevens.