Ford's Making Money
by
Jack Baruth
Published: April 26th, 2011
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The estimates seemed enthusiastic, but they weren’t enthusiastic enough. Ford had a solid first quarter.
First quarter revenue was $33.1 billion against estimates of $28.1B. Earnings per share were 61 cents against estimates of 50 cents. As of this writing, F is trading a $15.95 and heading up. I remember buying 20,000 shares in 2009 and selling them to finance a Koni Challenge run. If I’d held on to them, I’d be in a Daytona Prototype today!
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Good for Ford. I hope they keep it up. p.s., Jack must be filling in for Ed or Bertel because I don't recall seeing him posting articles as early as this one was posted this morning.
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It is great to see Ford doing well! It is primarily due to the relatively modest market recovery with their new cost structure that resulted from the 2007 UAW contract. The bad news is that UAW president King is already fanning the flames of class envy and labor strife using Mullally's 2010 compensation and claiming he will win back all the concessions next go round. That would be very bad news for Ford.
I think the financial markets' reaction to the Lehman failure had a lot to do with the GM and Chrysler Bailouts. The UAW likely got a better deal than it would have otherwise, but I honestly believe the Government stepped in to quell fears, much like it did with TARP for the Banks. As far as the next round of UAW negotiations goes, I think the Union needs to be careful. The government bought Ford and GM (Chrysler's fate is iin FIAT's hands in my opinion) time to evolve into the companies there competitors are here in the US, if they are smart enough to do it. GM still lacks strategic direction, but Mulally came from Boeing he knows what he's doing. Fiesta production in Mexico is the first step, Ford will slowly shift domestic production into right to work states (which its international competiton has largely done) and Mexico, freeing the company from UAW contracts. It will be a long process, but with a positive Outlook at Moody's Ford is about 18 mos away from entering the Investment Grade market. I work on a debt desk, and Ford is already considered a "crossover" credit its sold off the Investment Grade desk, but largly to High Yield investors. Once it has a BBB handle at one agency it can meaningfully refi high coupon Auto-sub debt and add leverage to the finance sub, this should allow them to remain profitable financing their now shallow-depreciation products even if the next UAW contract is more onerous. As long as they remain profitable the move away from UAW workers will happen. Sorry for the rant, I'm sure most UAW workers are honest hard working people, but we do have to face reality. There are a lot of people out there who can do the job and are willing to do it for less. The closed shop states should think about the impact it will have on them and make concessions.