The biggest recent news stories for Ford (F) have been related to its collaboration with State Farm Insurance to bring insurance discounts to consumers. State Farm Insurance will use Ford SYNC technology to expand its Drive Safe & Save program. This will lower insurance premiums, which will always go a long way to make a company more popular.
The system works as follows. If you have a Ford vehicle with Ford SYNC technology, you will be able to use the Vehicle Health Report feature to track and report your mileage. If you are driving safely and sensibly, you will win a reduction in your insurance premiums as a reward. The savings you receive will depend on the number of miles you actually drive, and the initial savings for those who sign up now will be around five percent of their auto insurance coverage. Depending on your mileage, you could save as much as 40 percent per year on your insurance premiums, which is quite a significant chunk of the cost. Furthermore, customers will be able to qualify for this service without having to pay a monthly subscription.
This paints the company in a very good light and will have a positive impact on Ford stock. The company is smart to find a way to reduce the insurance premiums that its consumers have to pay. This may also inspire more people to buy Fords with Ford SYNC technology, which will increase the company's revenue. It is quite promising when a company's action has potential to improve its image and increase revenue at the same time. If the idea takes off and gets a good reception, the stock could improve significantly.
Ford raised incentives this month to "boost domestic sales after cutting them about $300 a vehicle in April." This is probably for the best. Following the cuts in incentives last month, the company experienced a bit of a dip in terms of revenue. By raising incentives once again, it is now in line with industry incentive standards. The industry tends to be very disciplined in terms of the discounts it offers its consumers in order to make its products more attractive. Ford stock will probably do well as a result of this improvement.
Not all the news about Ford is positive. The company is going to lose market share this year. It simply cannot seem to keep up with the rise in demand. This may come as a bit of a disappointment to stockholders who have started expecting the company to always experience gains in this regard. Raising incentives may serve to combat this situation, but rivals such as General Motors (GM) are still offering higher incentives. Ford has been consistently below its key competitors for a while now, and this will most likely have a negative effect on the stock over the next few months. Although the company is not looking that bad, Ford is not in an ideal position, and further strategies need to be put into place in order to remain strong and avoid further declines.
Ford competitor General Motors has recently signed a deal with Manchester United to be the club's official motor sponsor. This is an attempt by General Motors to give its Chevrolet brand a worldwide presence that cannot be ignored. The strategy does seem to be a sensible one. The club has roughly 659 million fans, and about 108 million of them come from China, one of the company's most lucrative parts of the world. Football-also known as soccer-is the most popular sport worldwide, and Manchester United is probably the most popular team. Critics may question the company's advertising strategy, but I feel it is on to something with this move. This is showing the possible strength of the company's advertising strategy and will likely have a good impact on General Motors stock.
Toyota (TM) experienced the biggest improvement in consumer expectations of quality this year, and it is quickly closing the gap between itself and Honda (HMC), the leading company. This is great news for Toyota, as it has been hoping for an improvement like this for some time now. According to the same annual survey by data provider ALG, however, General Motors is one of the brands that "deteriorated the most among the mainstream brands included in the study." This is mostly due to the lack of marketing success with the Chevrolet brand. The new advertising strategy may help General Motors deal with this bad press, but this report will have a positive impact on Toyota, a neutral one on Honda, and a negative one on General Motors.
Honda recently decided to slash the price of its British Honda Civic by 40%. To me, this seems like an interesting attempt to "discount its way back into contention." The Civic is now one of the least expensive European-built cars in its class. This is certainly an interesting strategy, and we have yet to see if it will be a successful method for Honda to get itself back into the running. Slashing prices can certainly generate interest in a brand, but only if those price slashes are within reason. I think this will have a fairly neutral effect on the stock, as some will be pleased with the tactic, while it may alarm others. It is a somewhat risky move, and after some time passes, its success or failure will begin to have a more significant effect on the stock.
There have been quite a few reports about the fact that Chinese customers are unhappy with a glitch in Volkswagen's DSG gearboxes. The company has consistently maintained that there is nothing wrong with the gearbox. This is despite the fact that consumers went on Watchdog and attempted to instigate a recall. Volkswagen, however, has made the concession of providing extended warranties on the vehicles in an effort to restore the confidence of consumers. This bad press will further hinder the company, leading some customers to begin purchasing cars from other companies instead. This will have a limited impact, but it will still have a slightly positive effect on the stocks of these other companies.
These companies must also compete with Tesla Motors (TSLA), as the electric car industry is moving forward. Companies like Ford and General Motors have begun to investigate electric cars, but they have not done so with much conviction. If this industry does start to take off, Tesla will become a major force, and its stock will rise while others will likely struggle more.
While Ford is certainly not a bad company at the moment, it is struggling to keep up with its competition. As Toyota is being acknowledged for major improvements and Tesla benefits from surges in the electric car industry, there appear to be stronger options available. Regardless, based on the diverse news stories, I think that Ford stock will see gains over the next 12 months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
