Question Of The Day: Is Ford On Shaky Ground?

by Cammy Corrigan

Published: May 6th, 2010

question of the day is ford on shaky ground

To anyone who reads my articles, (that’d be Bertel and my mother) you’d know that I’m not a big fan of Ford. Mark Fields is Susan Docherty for Ford, their cars underwhelm me, and I don’t really like the company as a whole. Having said that, I am a journalist. (Don’t laugh! I am!) And I am professionally impartial. So, when I was on the train last night, I decided to do a quick rundown of Ford’s situation. Currently, they are the darlings of the North American market and Europe loves them, too. They turned a big profit in the first quarter of this year and confidence is growing in the company. But despite all of the this, the markets aren’t convinced.

On 4/26/2010 Ford’s share prices hit a high of $14.46, as if it was the heydays of 2003/2004. It was downhill from there. At the time of this typing, the F share stood at $12.34. It has been on a continual slide for, seemingly, no apparent reason. To be fair to Ford, they can’t impress the markets, no matter what they do. When they announced their $2.1 billion profits for Q1 of 2010, their share price fell 3.2 percent (46 cents) because the profits were “ unsustainable“. What do the markets want? Blood?

Actually, more likely, a liposuction of Ford’s debt. In the same quarter, Ford’s debt mountain increased by $700 million to $34.3 billion. And as our B&B have mentioned many times, Ford’s debt mountain is a problem. So the question to our B&B is this: Is Ford’s momentum unsustainable (like their profits, apparently) or does Ford have a real chance at survival? With Greece’s problems likely to go global and Spain, Italy, Ireland and Portugal looking shaky, it could be the push the economy doesn’t need to set off another recession. Ford is strong in Europe, and a European recession would hit them hard. In China and India, Ford is a relative nobody. The growth there doesn’t help Ford. Looks like the smart money sold on the news.

Cammy Corrigan

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Telegraph Road on May 06, 2010

Despite the recent pullback, Ford Motor Company has a market capitalization greater than Volkswagen or Nissan. Toyota, Daimler, and Honda have greater capitalizations than Ford, however. High market capitalization provides access to additional sources of funds that can mitigate bankruptcy risk. Bond yields, debt ratings, and credit default swap prices are better predictors of bankruptcy risk than stock prices. These have been steadily improving for Ford. Despite what one commenter implied, Ford's biggest threat is not the survival of arch-competitors GM and Chrysler. Just the opposite, Ford's biggest threat is the failure and liquidation of these companies, which could bring down suppliers and Ford with it. My views are my own and not those my Dearborn OEM employer.

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Carlson Fan on May 06, 2010

I find Z71 refreshing and he's a nice change from the typical GM haters/bashers who post on TTAC. Although I don't have it out for Ford like he does. Soldier on.....LOL

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