By on June 19, 2008

bruce.jpgI recently bought a dishwasher. Investor Kirk Kerkorian (a.k.a. “The Lion of Las Vegas”) bought 20m shares of Ford Motor Company. As a percentage of net worth, we each spent comparative amounts. But I’m pretty sure I got the better deal. I’m positive I’m going to have guacamole-free dinnerware for the next five years. Capt. Kirk can’t make anywhere near as bold a statement about the longer-term value of his Ford shares. Or can he?

In May, billionaire Kirk Kerkorian’s Tracinda Corp. tendered an offer to purchase Ford stock at $8.50 per share, back when the American automaker’s stock price hovering around $6.12. Investors offered 1.02 billion of the outstanding 2.24 billion shares. Tracinda increased its stake in FoMoCo from 4.7 to 5.5 percent. This week, Kirk's mob upped their share of FoMoCo to 148m shares, or 6.49 percent of Ford's public stock.

The deal is glass-like, as in half empty or half full. The fact that the nation’s seventh richest man is willing to overpay for Ford paper by 34 percent is a glowing vote of confidence in the company. Tracinda believes Ford will transcend its troubles.

Conversely, owners holding almost half the company’s value wanted to dump and scatter like the cops just showed up. These people didn’t think Ford stock would reach even $8.60 any time soon. And why would they? Ten years ago, the stock traded in the 60s. Exactly whose view is more valid is a matter of perspective. Do you put more credence in the opinion of a couple thousand people or one 91-year-old guy?

It helps to know more about Kirk. An accomplished pilot, Kerkorian made his early money delivering Canadian planes to England using the fastest, most profitable and life-risking route. After WWII, he turned surplus bombers into an enormously successful charter airline. Its core service was Los Angles to Los Vegas. Sin City is where Kerkorian made his banked billions, buying and selling casinos and hotels.

Kerkorian’s interest in America’s automotive world is a familiar story. In 1995, he ambled over to a house of straw. Chrysler fended off the hostile takeover. In 2006, it was the RenCen’s house of wood. Kirk blew into the boardroom with 9.9 percent of GM’s stock, but accomplished nothing. He unloaded it all and huffed away. Departing from the traditional tale, Kerkorian went back to Chrysler in 2007, as Daimler sought to shed the company. He was outbid by Cerberus Capital Management. A year later and he’s standing outside Ford’s house of glass.

So what, precisely, does Tracinda want out of its Ford position? Seven percent of a company is certainly a good chunk, but it’s far from controlling interest. The Ford family retains 40 percent control, no matter who else owns what. Sure, you get influence, but you are not in charge. Even if, according to regulatory filings, Kirk's willing to offer an an "infusion of additional capital."

Perhaps Ford is a good buy. There are angles from which to view Ford stock whereby it’s doesn’t look so limp. Cash and equivalents divide out to more than $11 per share. Property is worth about $16 per share. Eight dollars and fifty cents ain’t bad if you’re going to carve this pig up. Not that slicing and serving are in Ford’s future. The family has become quite attached. Besides, if GM or Chrysler go down, they’ll be other meat on the table.

If Tracinda were simply taking a position in an undervalued stock, why go whole hog for this one? As of June Standard & Poors put FoMoCo in the bottom 40 of their 500 index. Ford’s off 28.9 percent for the year. Soaring gas prices are shifting U.S. consumers' tastes faster than any company can re-tool. Ford is running far bellow capacity at eight of its 15 North American plants. 

On the positive side, Ford is probably better positioned than Chrysler or GM to survive the near future. At the very least, they have some fuel-efficient cars to market, with another on the way. The other two American automakers have sucking chest wounds where their trucks and SUVs used to be. Still, that is an odd way to buy stock: wait to see if two major competitors kick it.

Kerkorian is euphemistically referred to as an “activist stockholder.” During his 18 months as a major GM player, he tried to force a deal with Renault/Nissan. When the board wouldn’t play his game, he sold his ball and left. Again, despite the back room meetings with Big Al and attendant ass-kissing, Kirk can’t realistically expect more power at Ford until the company is so far gone it's probably not worth it. 

All Kirk can really do is depreciate CEO Alan Mulally’s authority, either by suggesting what Mulally was going to do anyway, thus sapping credit, or causing dissention. Put short, he can make a small mess just when it appears Mulally has set the Blue Oval for “pots and pans” and hit start. Half full, half empty, whatever. For Ford’s sake, I’d like to see Kerkorian come clean.

Get the latest TTAC e-Newsletter!

50 Comments on “Ford Death Watch 45: Last Man Standing Pt. 2...”


  • avatar
    Pch101

    Chart it out and one thing becomes obvious — the stock is dirt cheap in comparison to its SUV heyday. That makes it interesting to begin looking at it.

    The EBIT is actually positive, although small. (This is in stark contrast to GM, which is still losing on operations, big time.) Still, Ford is generating positive income from operating the business, which is probably a pleasant surprise to a lot of people.

    What kills it are below the line items, like interest expense. Ford is heavily loaded with debt, and pays a lot to service it. But if Ford can improve its business, it should be able to pay down chunks of it, and refinance the rest to lower that cost.

    In a way, buying Ford is also one way to invest in the oil bubble. If you believe as I do that oil prices are due for a correction, then it might follow that SUV and truck sales could pick up next year. They probably will never return to their former heights, but it could be enough to help Ford’s income for 2009, which is the investment horizon here.

    Buying Ford is a gamble, but it could pay off big. If they can manage their way through the now-dying truck market and turn the Fiesta into a home run in the US and Europe, as they have with the Mondeo in Europe, then they could be on the road to recovery.

    If that happens, then that should give a real lift to the stock, and your returns could be substantially higher than they would be buying unquestionably successful companies such as Toyota or Honda, which are better businesses but can only be acquired for a high premium.

    I was actually just looking this yesterday, and I’m tempted to buy a chunk myself. I’m trying to figure out whether to wait for the second quarter numbers to come out or to just do it now.

  • avatar
    gamper

    Kerkorian’s interest in Ford is a curiosity for sure. I really think it goes beyond seeing value in an undervalued stock. Going from Chrysler, to GM to Ford makes it seem like Kerkorian has a personal interest in playing auto manufacturer. Some form of interest that goes beyond money to some sort of personal fascination.

    I dont know all the history behind his ventures, but it would be interesting to see what if anything he has made from these ventures.

    Unless he has insider information, I dont see Ford stock as having much potential for growth in the short term and if the past is any indication, Kerkorian is not likely to be a long term investor.

  • avatar
    dwford

    I would be quite a few of those taking Kirk’s offer just re-bought their shares at market value and booked a quick profit.

    I, for one, am very bullish on Ford’s prospects. If you take the time to read up on what Ford is doing to fix it’s business and what they have in the pipeline, it’s easy to see they have a better handle on reality than GM and Chrysler. The next few years will still be transitional for Ford as they harmonize their product lines world-wide, and the true results of Mulally’s work won’t be fully realized until 2011-2013.

    I’m trying to buy more Ford today, hopefully it drops to $6 today!

  • avatar
    Steven Lang

    “Do you put more credence in the opinion of a couple thousand people or one 91-year-old guy?”

    These fellows do not invest on a whim. Kerkorian has more than his share of analysts and relationships (both inside and outside of the companies he usually buys), and the fellow is well known for doing an awful lot of homework before tendering an offer.

    Kerkorian could have outbid Cerberus, but declined to do so. He could have easily done it with several billion left over. In the meantime, GM’s stock is under freefall and most of my remarketing associates are predicting Chrysler will either be sold (part or whole) and/or thrown into Chapter 11 within the next 12 months.

  • avatar

    Ford’s the company closest to being able to claw its way out of the suv/trucks/pick-up sinkhole. Mulally got started in the right direction while Wagoner was asleep at the wheel.

    I’m expecting Ford to offer the next leap car – the one that recognizes that 82% of all trips by car in the US are made by 2 people or less (actually, 75% of all trips are made by one person).

  • avatar
    dwford

    I’d love to see them announce that the next Ka is coming here. I’d also love them to follow the Honda Fit model of selling a quality, well equipped small car instead of a penalty box like the Yaris. People are trading down in size, but don’t want to give up the substantial feel or the toys of the larger vehicles.

  • avatar
    Pch101

    One of the key differences between Ford and GM that benefits Ford is that Ford could save itself with just a hit product or two. The company’s branding channels are small enough that one or two hit products can do a lot for the business.

    You can’t say that about GM. GM is so sprawling and massive that it needs many, many hits to offset all of the dogs in its lineup. A Malibu here and an Enclave there just won’t cut it, they need a half-dozen more successes just like them to make up for the losses, and that stuff is not in their pipeline.

    What would really position Ford well over the medium term is to have a luxury sedan in time for the economic recovery. Just one sedan selling in decent numbers, combined with reasonable sales of the Fiesta, Focus, Mondeo, Fusion and their crossovers would be enough to make them nicely profitable, and not just skimming by as they are now.

  • avatar
    dwford

    Pch101:

    absolutely right. GM is still stuck producing multiple variants of the same chassis to stock all their different channels. Even with the platform sharing they are doing now and what they have coming, they are still wasting money on additional stylings. i.e. Malibu/G6/Aura, Enclave/Acadia/Outlook/Traverse etc…

  • avatar
    geeber

    dwford: I’d also love them to follow the Honda Fit model of selling a quality, well equipped small car instead of a penalty box like the Yaris. People are trading down in size, but don’t want to give up the substantial feel or the toys of the larger vehicles.

    Isn’t that what the upcoming Fiesta is supposed to do?

  • avatar
    dwford

    Geeber,

    Yes, but we don’t know yet how Ford will position the car. They could go for the $12k stripper market, or sell it full equipped in te $15-18 range.

  • avatar
    blautens

    dwford :
    June 19th, 2008 at 10:26 am
    I’m trying to buy more Ford today, hopefully it drops to $6 today!

    I think it’s a bet worth taking…I wouldn’t mortgage my house for it, but I’m willing to bet a little on this…it’s 6.19 now.

  • avatar
    bunkie

    One important downstream result of the current drop-off in sales is that when the economy recovers, an awful lot of worn-out vehicles are going to need to be replaced. Yes, this will benefit the import brands, but if you have any belief that the current pricing of oil is a bubble, it bodes well for any of the big 2.8 that can survive until 2010 or so and have a decent product selection at that time. From this perspective, Ford looks good at $8 per share.

    It’s a bet, like any financial investment. But it’s one that might pay off handsomely.

  • avatar
    Pch101

    It’s a bet, like any financial investment. But it’s one that might pay off handsomely.

    It’s definitely a tossup. I could see it doing one of a few things:

    -Keep falling, maybe as much as 50%, but certainly below $5.

    -Stay fairly flat, just seesawing around but not doing much of anything.

    -Doing very well, perhaps increasing 3-4x in value.

    I seriously thought about GM at $15, but I don’t see the upside potential in it, whereas it has a long way that it could down. If it gets really cheap, I might buy it on the hopes of a federal bailout giving it a lift, but after much hemming and hawing, I’ve decided that it’s too expensive, even at $15. (I could definitely be wrong about this, though.)

    As for a guy like Kerkorian, this is more about having fun and keeping score. He gets off on this kind of stuff, staying in the game keeps him alive and gives him something to do. He seems to like car companies, which may be more of a hobby than something he pursues purely for business reasons.

    The superrich who earned their money enjoy the game and want to keep playing it until the day they die. They make money because they enjoy making it, not because they have to.

  • avatar
    bluecon

    i would buy it agter the next months sales results come out.

    Mulally seems to be the only leader at the Big 2.8 that understands the auto industry. If they can survive the short term and the coming bloodbath they will be worth a lot more than 6 bucks a share.

    Chrysler just seems so helpless. What was Lasorda and the Germans thinking with their new product? All terrible except for the Journey and maybe the bloated minivans. Chrysler still has the antique V6’s and the buzzy new 4 banger.

    GM just seems directionless.

    The dead cat bounce will pay off for ford.

  • avatar
    guyincognito

    @ dwford:

    Screw the Ka, I want a Puma.

    I agree that Ford is in the best postion of the Detroit automakers, but I don’t think that is why Captain Kirk has gotten involved. Rather, I think he’s there because Ford is in a vulnerable financial situation, due to that secured loan from Citi, Merril and JP. Instead of securing the business and becoming profitable in 2009, Ford doesn’t even have an outlook on a return to profitability/ability to refinance that debt and its gonna take one hell of a lot of Verve’s to make up for the lost profit of hundreds of thousands of F-150’s. No, I think Kerkorian sees blood and wants nothing short of wresting control of the company from the Ford family and orchestrating a merger with Renault/Nissan.

  • avatar
    menno

    The question is, will Renault/Nissan WANT to do a merger with Ford if Kirk steals the company legally from the family?

    I do think Ford may be the last man standing, within a decade.

    Of course, it may not be recognizable as the same company.

    But that beats being 6 feet under as I think Chrysler and GM will be.

    Chrysler has 24 months or less to live. I tell anyone who asks – avoid that like the plague.

  • avatar
    dwford

    “I think it’s a bet worth taking…I wouldn’t mortgage my house for it, but I’m willing to bet a little on this…it’s 6.19 now.”

    I sure am not mortgaging the house, but I am putting 1/2 of this year’s investible cash flow into Ford. The way I see it, I have only about another 6-8 months to build a decent position. With all the new product Ford has coming: 2010 Fusion, Taurus, Fiesta, Transit, MKZ, MKT, 2011 Focus, Explorer, Kuga etc., Ford will be on the upswing starting around January.

  • avatar
    netrun

    I’m with guyincognito that Kirk doesn’t play a team game – it’s all about getting his car company and doing things his way. He sees blood in the water and a very weak Ford and he’s going after it full bore, just like he does everything else. I wish the Ford family luck, they’re going to need a strong stick to keep this lion from feeding.

    @Pch101, go through GM’s stated financials, including the small print, try to fully estimate their true pension liability, and I think you’ll find that the stock value to be somewhere less than 0. A lot of people probably knew this but were willing to be hoodwinked up until now. I believe GM has run out of distractions to keep people from noticing how badly their operations are sucking wind.

  • avatar
    Bunter1

    Recently bought some Ford and am considering more.

    They are losing sales but market share is pretty stable. Seem to have control of their costs and have operating profit.

    Last year nearly 80% of their products were above average reliability in CR. Way ahead of the other two.

    I agree that I wouldn’t bet the farm but Kirk didn’t get rich by being a fool.

    Bunter

  • avatar
    jerry weber

    Here is the problem for the domestic mfgs. You trade the sale of a $30-40K suv or luxo truck for an econobox and some would say isn’t that great you kept your share of the market. Except, that the 30-40K sale gives you say $5-10K profit, the 15K sale will be skinny to none. Thus, it is not an even trade for the domestics. If you can sell a tin can gussied up in the $20+K range then you have some profits. HOwever all of these areas are well covered by the Japanese, and Koreans with the Chinese and Indians looking over the fence at this market. Do I buy a Honda sedan with a 52% residual in 3 years or a chevy, ford, dodge, with say 35%? With comparable fuel economy, the Detroit gang still has to find out how to win this trade in game. Remeber, people don’t pay sticker price for a car, they pay for the difference between their trade and the new one, here the Japanese have been winning for years.

  • avatar
    Pch101

    @Pch101, go through GM’s stated financials, including the small print, try to fully estimate their true pension liability, and I think you’ll find that the stock value to be somewhere less than 0.

    On the fundamentals, you are correct. GM has an upside down balance sheet and an inverted income statement, with no product pipeline that can turn the losses into profit.

    If you play GM, you wouldn’t be doing it on the fundamentals, but on the dead cat bounce that comes from a federal bailout or some glimmer of hope that things are turning around. That glimmer of hope drove the stock recently from $20 to $40, even though the fundamentals themselves were always rotten, and that could happen again as everyone discovers that GM’s stock price is the lowest it has been in 30+ years.

    This is not value investing, but speculating on somewhat arbitrary price movements. A lot like playing with oil is right now, although the upside and downside potential are much lower for GM, due to the lack of leverage.

  • avatar
    folkdancer

    dwford :
    they are still wasting money on additional stylings. i.e. Malibu/G6/Aura, Enclave/Acadia/Outlook/Traverse etc…

    I wonder how many librarians GM has hired to keep track of all their models and crossbrandings?

  • avatar
    KixStart

    Stein X. Leikanger: “I’m expecting Ford to offer the next leap car – the one that recognizes that 82% of all trips by car in the US are made by 2 people or less (actually, 75% of all trips are made by one person).”

    Will they name it the Ford EXP? Again?

  • avatar
    KatiePuckrik

    I don’t think Kirk will wrest control from the Ford family and try to re-ignite his Renault-Nissan merger idea for 3 reasons:

    1. The Ford family still own 40% of the voting rights PLUS a lot of influence over other major investors. The Ford family have shown some sense in recent years, like ceding the CEO position to Alan Mullaly. Incidentally, if I were the Ford family, I would buy up as much of the Ford stock as I could whilst it was cheap. I, personally, wouldn’t like the idea of my family’s company falling into someone else’s hands. The more stock you have, the more control you can assert. Have they never watched “Arrested Development”?

    2. Kirk would be insane to mess around with ANYTHING at Ford right now. Alan Mullaly is doing a good job there (i.e Jettisoning Jaguar and Land Rover, bringing Euro Fords to NA etc) and to mess with that could jeopardise everything. It would behoove Kirk to remember that Ford secured its $25 billion restructuring loan on one fundamental principle. That Alan Mullaly was in charge.

    3. If Kirk does wrest control from the Ford and family AND Alan Mullaly agrees to a Renault-Nissan merger, what would be the point? Renault keep saying that they are looking for an American partner, but they (in a funny way) already have one, Nissan. Nissan has a strong foothold in NA, has experience in building trucks & SUV’s and a good image in NA. I believe that Renault want “an american partner to help give them a foothold into NA again. However, there is another scenario unfolding which would work in Renault’s favour.

    If, like other people have said, oil is due for a price correction soon, then sales of SUV’s and Trucks could pick up. However, what if it was too late to save Chrysler and they go into chapter 11 (or worse chapter 7)? That would mean that Jeep would be up for grabs. Renault could swoop in, pick up Jeep for a song (maybe Dodge, as well, if the truck market picks up), send in a Nissan quality hit-squad to make their SUV’s & trucks more reliable and then, Renault would have their foothold back in NA with a profitable division at their disposal. Cerberus would be happy, because Renault would pay them a fair price for Dodge and Jeep which would offset much of their failed auto adventure. Thus, rendering the need for a merger with Ford pointless.

    I think this is no more than Kirk, picking up stock in a company which has great potential, nothing more. This is why Kirk got frustrated at GM. He wanted to change GM around, but this interfered with Rabid Rick’s “turnaround” plans. Kirk, unlike Rick, Bob and Fritz, was the only person who stood to LOSE money if GM went under. Kirk just wants to make money and Ford has the best chance of survival and with Alan Mullaly at the helm, Ford should be all right. If Kirk tries to change that, then he must want to lose money for a change……

  • avatar
    RobertSD

    I’ve been trying to judge Kirk’s motive, and all I can come to is that he’s hoping to restore some of his credibility as an auto guru before he dies. Basically, he messed up at GM and Chrysler. He is seen as activist and really quite a thorn in the side of the business leaders of the auto industry. However, Ford, as has been pointed out, is probably in the best position to weather this storm. So, you dump money into the company – a company where board loyalty and support of Mulally will be hard to crack – to ride some of the hoped for success and restore your credibility.

    And it’s not that high of a financial risk, honestly. Ford actually has a positive asset balance almost as large as their market cap. Leclair is by far the best auto CFO in the business. He’s making sure the books look as good as possible given the state of the industry.

    As far as stock price goes, I would bet we have another 20% to fall. Most of it should come out at the end of June through the July Q2 earnings call. There is no positive expectation left for Ford’s F-150, which is actually good for them, because that means any success in stealing marketshare they do have will only help their position in the marketplace.

    I think most of the bad news is baked in. What people will be looking for is cash position, especially going into 2009 and what Ford is doing to contain costs. Should be interesting…

  • avatar
    RobertSD

    @KatiePuckrik

    Nissan quality is about laughable as Corolla driving dynamics or Expedition gas mileage.

    Sorry, try again.

  • avatar
    KatiePuckrik

    RobertSD,

    Nissan’s quality may be laughable, I agree, BUT:

    1. It’s certainly better than Chrysler’s current quality.

    and

    2. Infiniti has some top quality on their cars. Who do you think engineers those cars? Toyota?

    Try again.

  • avatar
    Gregg

    @KatiePuckrik

    Katie, you forgot your ‘kick Mark Fields to the curb’ remarks.

  • avatar
    Engineer

    If you believe as I do that oil prices are due for a correction…
    As documented, I do not share that belief. Nonetheless, and in spite of our little argument difference in opinion, I would hate to see you lose money take undue risk.

    As the housing and internet bubbles showed, it is almost impossible to time the correction. Why try to time this one? You may end up waiting years for the oil bubble to pop. Much can go wrong at Ford during that time, e.g. the Ford family can grow tired of Mulally, or Kirk could do some damage (intentionally or otherwise). Why risk it?

    I suggest an alternative strategy: wait for oil’s own Black Tuesday. In the aftermath of this correction, there is likely to be chaos in the financial markets. However, having anticipated the event, you can coldly buy Ford stock on the Wednesday. Despite our high regard for proffesional traders, these guys tend to lag the market by several weeks, e.g. many were recommending ethanol stocks at their height and only switched to get the hell out after these stocks lost 50%+ of their value. It would take weeks (at least, more likely: months) for Ford stock to fully respond to oil’s own Black Tuesday. That’s the time you can use to your own advantage.

    There is a risk that Ford stock could increase in value even before oil’s Black Tuesday, but that is beside the point. A stronger Ford might respond even more positively to the popping of the oil bubble.

    You might even be able to set this up automatically: Buy Ford stocks if oil drops below $75/bbl, or whatever level you choose…

    See, now you even have me convinced. If oil hits its Black Tuesday (an event I still don’t see happening), even I would be tempted to buy Ford…

  • avatar
    Pch101

    As the housing and internet bubbles showed, it is almost impossible to time the correction. Why try to time this one?

    You don’t need to time it with a stock purchase. If you were buying, er, oil futures or call options on the stock, timing would be everything (which is why it is tough to short oil on the market, even if you believe that it is due for a hit.)

    However, you could buy Ford stock, sit on it for a couple of years, and then let it lift itself up for whenever it actually rebounds. The exact timing won’t really matter, it will just impact your return.

    Unless you believe that the stock is going to zero, the downside is fairly limited in comparison to the potential upside. If you think that the company can clean itself up, then the upside in the stock is much greater than the downside.

    You can see that Mulally is trying to clean up the balance sheet, which is good. The question is one of whether he can generate the revenue that will fund that cleanup. That’s hard to say, because the lineup isn’t stellar and it has some notably weak products in it.

    But then again, it need not necessarily be a complete home run for it to be worthwhile. Reducing some costs and getting a few successful revenue producers could just be enough to make the difference.

    I’m still wondering about the timing of the buy, though. The second quarter numbers are probably going to be ugly, so the stock may well go down before it goes up. Not sure if I should be greedy and wait for another potential dip, or just to take the plunge now and ride it out/dollar cost average my way through it.

  • avatar
    tech98

    …turn the Fiesta into a home run in the US and Europe

    But it will take some time for Ford’s Detroit engineers to turn the stylish Mazda 2 into a snoozer-bland design that doesn’t scare their parochial Midwest focus groups.

    Then of course they’ll need to de-content it so it will feel cheap, break frequently and require a dozen recalls, like they did when they brought the European Focus stateside and penny-pinched it into mediocrity. These things take time.

  • avatar
    USAFMech

    @ “sucking chest wounds”

    Ha! That’s one of my favorite lines. That’s the kind of battlefield wound that seperates the men from the vomiting boys.

  • avatar
    Engineer

    Als alle gekken konden vliegen hadden we een permanente zonsverduistering = Dutch.
    Language on the poster = Some Scandinavian language? Why? TTAC reaching out to a European audience? What next? Posting in multiple languages?

  • avatar
    Engineer

    You don’t need to time it with a stock purchase.
    If you are dead sure you are right about the oil bubble, go ahead, pull the trigger.

    I would at least entertain the possibility that there is no oil bubble, and that Ford is in for hard times for years to come, even if it beats GM and CryCo. As I said, in spite of everything, things could still go horribly wrong @ Ford. Why risk it?

    It’s your money. Mine is waiting in the wings…

  • avatar
    Rix

    The guy is 91 years old. He doesn’t have time to wait for GM to turn around, let along ChryCo. Obviously, he is doing this for the fun of the game and not for the money. If I were an elderly car nut with a few extra billion to play with I might buy myself a car company to play with as well.

  • avatar
    Landcrusher

    I don’t think you could carve Ford up and get away with it. Also, if you bankrupt it, then the Family and management would likely get options to buy into the new stock at a reduced rate while all the little stock holders get squat.

    That’s correct folks, the people who kill a company get the new stock at a bargain, while the other stockholders, who should have had a say in how to dispose of it’s properties, get nothing. This is done to protect the workers, vendors, customers, and communities from the loss of such an important company.

    The powerful and the poor who are responsible get to divide the spoils of the stockholders who were just saps lenders. Sounds more like the USSR than the USA, but that’s how it is.

  • avatar
    Pch101

    I would at least entertain the possibility that there is no oil bubble, and that Ford is in for hard times for years to come, even if it beats GM and CryCo. As I said, in spite of everything, things could still go horribly wrong @ Ford. Why risk it?

    For one, it doesn’t have to be a long-term investment. Buying Ford is a speculative play, and not one to do strictly on the fundamentals.

    Whether or not it makes sense all depends upon the possible scenarios that you see and the odds you that you give them. In my case, I could see the thing either wallowing around doing a whole lot of nothing, dropping by as much as half or increasing by a factor of 3-4.

    If I assign odds to each of those alternatives and then add them up, I end up with a positive total, which means that I should take the bet if I can absorb the hit of the negative outcome. If you don’t see those as being the alternatives, then you would understandably feel differently.

  • avatar
    bluecon

    The game is to survive the short term and shut as many UAW/CAW plants as possible and then start importing product from low cost producers such as the new small car plant in Mexico.
    Soon there will be one Ford plant left in Canada and a handful in the USA. Once they are no longer held hostage by the UAW/CAW they will become profitable.

  • avatar
    Engineer

    If I assign odds to each of those alternatives and then add them up, I end up with a positive total, which means that I should take the bet if I can absorb the hit of the negative outcome.
    Good luck with that, then!

    If you don’t see those as being the alternatives, then you would understandably feel differently.
    To me the obvious buy signal would be the oil bubble popping. Of all the truck-dependant companies, Ford is most likely to be strong enough to take advantage of such an event.

    You calculated odds, and you like what you see. That’s fine. I would say, why bother with the odds as they are? Why not wait for the odds to turn decidedly in favor of a higher stock price?

  • avatar
    Pch101

    To me the obvious buy signal would be the oil bubble popping.

    The problem with that may be that it might be a little late by then. We’ll see.

    I see that F is diving today, in sympathy with the Dow falling. It’s hard to call, but I could see the Dow going below 11,000. If that’s the case, it might be smart to wait until then…assuming that one can predict the Dow with such confidence.

  • avatar
    Martin B

    Als alle gekken konden vliegen hadden we een permanente zonsverduistering

    “If every crazy guy could fly we’d have a permanent eclipse?”

  • avatar
    Martin B

    My best guess: “If idiots could fly they’d darken the sun” i.e. there are plenty of idiots out there. Dutch proverb?

  • avatar

    Correct!

  • avatar
    Engineer

    I see that F is diving today, in sympathy with the Dow falling.
    I think most analysts see it the other way round, i.e. Ford (and others) dragging the Dow below 12,000, with more sliding distinctly possible. Heard the rumors about June sales?

    Regardless, you may want to hang onto your cash for a bit…

  • avatar
    Pch101

    I think most analysts see it the other way round, i.e. Ford (and others) dragging the Dow below 12,000

    This seems to be more of a reaction to the banking stocks. Ford is not a big piece of the Dow, and couldn’t possibly drag it down that much by itself.

    I noted above the issue of 2nd quarter numbers being a potential factor. The question is whether the current price or something close to it has already been dialed into those numbers.

    I think that everybody already knows that 2nd quarter is going to suck. Whether that’s completely accounted for in the price is debatable. Since Ford has no earnings, there is P/E ratio to work with, the price is going to naturally be somewhat arbitrary by default. How arbitrary it is exactly is hard to say.

    And trying to time absolute bottoms or tops is very tough, for anything. If you always try to do it perfectly, then you’ll never buy anything. The idea is to make a profitable pick, not to squeeze every single penny from that pick.

  • avatar
    FromBrazil

    Ummmm

    I’ll forgo giving any tips here as I”m really not qualified, but after reading everything, and beleiving the oil bubble will burst (while at the same time hoping American consumers won’t go back to previous buying patterns) I say buy Ford!!!

    From a pistonhead point of view…Ford is my favorite American car maker. I have had 3 Ford cars (out of a total of 10) in my life, being the last one, a Ford Ka, a POS. In spite of that, I’d still give the company one last try (as the 2 previous ones were ok). When I was a kid I’d insist with Dad to buy a Bronco (he never did) and one of my dream cars is still the Mustang circa 65.

    As far as GM goes, we had some of their cars in the past, very far away past, make that like at least 20 years. Problem is, they are so outdated down here, for a pistonhead family they are not even in the picture. Seriously, in my immediate family no one has a car of theirs or thinks of buying one. For me, to be honest, GM, curl up and die already.

    Chrysler is interesting from a design point of view but they don’t really exist down here.

    So Ford, Here’s one for you! I count on you to continue the great Amrican tradition when building cars. You have a fan in me.

  • avatar
    jerry weber

    The Detroit News has brought up in their Ford analysis the point that I knew was to be the rub for all three domestic mfg. Ford makes $100.00 on a sub-compact and up to $20,000 on a luxo SUV (probably the Lincoln pickup truck and the huge Expedition) When you try and convert your factories to the smaller cars you are also converting the cash flow downward to nill. At $100.00 per car how do you pay the debt service and the R&D for the future? If their cash trove is to see them over the immediate crisis, what is the end game now? Gas plummets to $2.00 per gallon and you crank up the hoary SUV’s again? If that is not the plan, what is?

  • avatar
    Pch101

    At $100.00 per car how do you pay the debt service and the R&D for the future?

    It’s funny that Toyota and Honda can build small cars in the US and Canada, including Corollas using UAW labor, while turning a profit.

    We need to realize that the argument that small cars aren’t profitable was always a lie, one that was made to blame labor for management’s own inefficiencies and to conceal structural problems within these companies themselves.

    The real challenge for Detroit is to build cars that are good enough that customers are willing to pay real money for them. Detroit’s extreme use of incentives and the fleet market were not part of a business strategy, but a reflection of the inadequacy of the product.

    Whether Mulally can fix this remains to be seen. The plan is to build the Fiesta in Mexico, which will lower their labor costs. Using a design common to Europe will lower their R&D costs, and should improve their economies of scale.

    The real challenge for Ford will be to make the car good enough that customers will willingly pay as much for it as they would for a competitor. That remains an unknown, and product quality and Ford’s ability to convince the public to trust the brand will determine that outcome.

  • avatar
    geeber

    I don’t know if I would go so far as to say that it was a “lie” that small cars couldn’t be built profitably with union labor here in the U.S.

    Even UAW Chief Ron Gettelfinger admitted that Ford would not make any money on the Fiesta if it were to be built here; hence the UAW hasn’t kicked up too much of a fuss over the decision to build it in Mexico.

    The key is what Ford does with this cost advantage. If it uses it to add more content to the car to better compete with the Fit, it will have a winner that will change the public’s perception of what a small Ford is. If it builds another stripper fleet special, Ford will ultimately end up right back where it started…

  • avatar
    Chui

    Well, whatever Ford, et als, has planned they certainly have NO plans for $250 per barrel oil do they? Gazprom, the Russian giant, is the largest supplier of fuels in the world and stated last week that some time in 2009, mind you, oil would be $250 per barrel.

    One of Ford’s Chief Engineers recently stated that “no economist predicted the economy to be as bad as it is or that the cost of fuel would be this high” in response to concerns about the apparently ‘delayed timing’ of focusing on small car. Well, he and I surely read different materials…

    If the heads within Ford could not forsee $4.00 per gallon fuel I’d not bet that they can forsee $7.50 per gallon fuel, either. Time will most assuredly tell though won’t it?

Read all comments

Recent Comments

  • Lou_BC: There were horse restrictions due to sh!t on streets
  • Lou_BC: @CoastieLenn – that’s something people do not grasp. The USA military consumes 12,600,000 US...
  • Kendahl: Modern houses come standard with electrical outlets for clothes dryers. No builder would think of omitting...
  • dal20402: Last I checked, this individual had a Ford Escort with the fog lamp blanks duct-taped over because it...
  • dal20402: A properly designed battery should be able to get you at least 2,000 full cycles or 600,000 miles for a...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber