The Reincarnation of Ford?

Ford Motor Company’s (F) financials are atrocious. Ford lost $15.3B in the last two years and its US market share dropped from 26% in the mid 1990’s to 14% at the end of 2007. Ford’s hope lies on two industry legends. Alan R. Mulally from Boeing (BA) and James D. Farley (cousin of the late comedian Chris Farley) from Toyota (TM) will inspire the reincarnation. The New York Times “A Star at Toyota, a Believer at Ford” gives us some insight into why Farley left the safe harbor of Toyota to enter the rough waters of Ford.

 An investment in Ford is similar to investing in Sears Holdings (SHLD) when Kmart went public with Eddie Lampert, after bankruptcy. You are buying the leadership, not the business. The biggest difference is Ford must sell products, not financial alchemy, as in the case of Sears.

 Ford’s products have become irrelevant over the last 30 years, except for a few golden SUV years. Less than 50% of Americans would consider purchasing a Ford product, even though the majority views the company favorably. Toyota has already beat Ford for second place in the US and is nipping at General Motors (GM) for first place worldwide.

 Mulally has been trying to recruit Farley since he arrived at Ford and William Ford has known and respected Farley for some time. Farley’s grandfather was a Ford Dealer. Mullaly, formally Boeing’s President and Chief Executive, wants to “globalize product development and accelerate the introduction of fuel-efficient cars in the United States.” Mullaly needs Farley to determine what customers want in their vehicles and figure out how to sell it to them. In essence, Farley is to focus on product development and make customers aware that Ford “gets it.” Once they have the right product, Mulally will deliver efficient manufacturing. That’s the plan.

 Farley is best known for successfully launching Toyota’s Scion brand and making it cool with young drivers. Farley is a hardcore car-guy. At 14, he worked summers in a plant that rebuild Ford engines. He holds an MBA from UCLA. After spending two years at IBM, Farley became a lifer at Toyota. Farley was rewarded with the group vice presidency of Lexus in April 2007. Now he wants to return to his Ford roots and make a difference.

The X-Files told us “the truth is out there” and “I want to believe.” But in the words of one of our presidential candidates, is this “change we can believe in?” GM and Toyota appear to be ahead of Ford in both design and technology, and the economy is weakening. Let’s wait and gamble on Ford at a very low price.

Disclosures: none

Comments

[bluesmoke]

The way I see it, transportation has a three pronged energy application:

Fleet Vehicles - Hydrogen & Natural Gas
Farm Vehicles - Ethanol
Trucks & Rail- Diesel
Commuter - Electric, & other experimental hybrids including compressed air.

In this capacity Ford must LEAD, not follow. Moreover, this strategy markedly reduces foreign oil consumption and puts the fuel
producers closest to their respective end users. This also assumes
nuclear power will return. I'm hoping for the best on this one.