Ford. Buy!

Ken Elias
by Ken Elias
ford buy

It’s time to buy Ford stock. It’s the big winner from the Presidential Task Force on Automobiles (PTFOA) announcement today– although you wouldn’t know it listening to the MSM. That’s the way Ford wants it… below the radar, off the screen, out of the limelight. They’ve been getting a dead cat bounce already; never has silence been so golden. The dictum “never gloat in the misery of others” makes for good business sense, since one never knows when the table will turn. Anyway, here’s why Ford will ride high.

First, Chrysler will go away thirty days from now. There is no deal with Fiat that saves Chrysler – ever. Why would Fiat take a stake in a company where the US taxpayer gets paid ahead of the Italians? Would you transfer your engines, your cars, your expertise and get zero return on your money for years? And add the fact that it will be at least two years before pasta-powered cars show up in America– with no guarantee that Americans really want very small Euro cars anyways. How does Chrysler survive in the interim? Will six billion dollars in assistance carry Chrysler for that period? I think not.

Then let’s examine the fact that Chrysler, unlike GM, has mostly secured debt lenders which are owed only $7 billion. Are they going to surrender their debt for an equity stake in a company that likely has no future even when run by the Italians? Heck, they’re better off with the liquidation proceeds. And that’s what they’ll do: give the Presidential Task Force on Automobiles the middle finger and hold firm on getting repaid. Hello Chapter 7 for Chrysler.

And GM? Do you really think that there’s any plausible way for GM to restructure its entire business in the next sixty days? Nope, and the PTFOA and GM know it. Today’s “conditional bailout” is really just a prelude to pre-packaged bankruptcy. It’s a breather that gives the company the time to get its ducks in a row before the filing. As the Viability Report acknowledges, General Motors has to sacrifice brands and dealers. Only a bankruptcy allows those changes without facing massive liabilities. Count on a GM bankruptcy as a fact, not speculation.

So with Chrysler gone to nothing but an asset sale, and GM rapidly downsizing to a much smaller company worldwide (likely consisting of only two brands in North America), the playing field for Ford just opened up. No more rabid discounting wars led by Chrysler. GM will be spending time to figure out a proper restructuring with management tied up in a court reorganization. Wow, in the midst of an auto meltdown, Ford sneaks through by staying the course on a plan designed two years ago.

it’s a new day dawning for Ford. The Blue Oval Boys will pick up a significant share of the commercial fleet business. That’s the big companies and government agencies that buy vehicles and mostly only from domestics. The three domestics currently split roughly 600k vehicles a year. The number is set to increase with the “stimulus package. With Chrysler gone and GM downsizing all of its excess capacity, Ford will see orders roll in. And with less competition, prices go up. Smell those profits.

On the consumer side, Ford will have a new Taurus this spring. The 2010 Fusion is rolling into showrooms now. Next year, a Euro Focus hits our shores (although built in North America). New turbocharged engines are on their way. And of course, Ford’s stalwart truck business continues. More units sold with better pricing can only produce more cash flow and profits for Ford.

Ford Europe benefits from GM’s struggles here. GM’s Opel can’t survive on its own. Without German government assistance, it’s more likely than not that Opel joins the dustbin of failed automakers. But even if the German government steps up, Opel still suffers from an “also ran” image in Europe. As a ward of the German government, Opel will make all the wrong decisions. Don’t forget, German really has its own “Green Party” as a voice in the legislature.

Sure, Ford’s balance sheet isn’t pretty with the company leveraged to the hilt. But it will accomplish a debt exchange since the carnage of a bankruptcy (thank you Chrysler and GM) leaves the creditors with… not much. Better to take the equity today and some cash for a stake in the future with Ford. While it will dilute existing shareholders, positive earnings of any kind will put a fire under Ford’s stock. And that’s going to happen sooner than later. The US car market is way below trend at a nine million units SAAR – and can only rebound above trend when buyers return. Ford will be there to benefit. Count on it.

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  • Coatejo Coatejo on Apr 03, 2009

    In less than a years time, Ford will be the only US based global automobile manufacturer. Chrysler will be gone (or owned by the Italians), and GM will be down to Chevy and Cadillac. This would be a good time to buy F.

  • GS650G GS650G on Apr 05, 2009

    Forget Ford, TMC is up 12 dollars in the past week.

  • ToolGuy CXXVIII comments?!?
  • ToolGuy I did truck things with my truck this past week, twenty-odd miles from home (farther than usual). Recall that the interior bed space of my (modified) truck is 98" x 74". On the ride home yesterday the bed carried a 20 foot extension ladder (10 feet long, flagged 14 inches past the rear bumper), two other ladders, a smallish air compressor, a largish shop vac, three large bins, some materials, some scrap, and a slew of tool cases/bags. It was pretty full, is what I'm saying.The range of the Cybertruck would have been just fine. Nothing I carried had any substantial weight to it, in truck terms. The frunk would have been extremely useful (lock the tool cases there, out of the way of the Bed Stuff, away from prying eyes and grasping fingers -- you say I can charge my cordless tools there? bonus). Stainless steel plus no paint is a plus.Apparently the Cybertruck bed will be 78" long (but over 96" with the tailgate folded down) and 60-65" wide. And then Tesla promises "100 cubic feet of exterior, lockable storage — including the under-bed, frunk and sail pillars." Underbed storage requires the bed to be clear of other stuff, but bottom line everything would have fit, especially when we consider the second row of seats (tools and some materials out of the weather).Some days I was hauling mostly air on one leg of the trip. There were several store runs involved, some for 8-foot stock. One day I bummed a ride in a Roush Mustang. Three separate times other drivers tried to run into my truck (stainless steel panels, yes please). The fuel savings would be large enough for me to notice and to care.TL;DR: This truck would work for me, as a truck. Sample size = 1.
  • Art Vandelay Dodge should bring this back. They could sell it as the classic classic classic model
  • Surferjoe Still have a 2013 RDX, naturally aspirated V6, just can't get behind a 4 banger turbo.Also gloriously absent, ESS, lane departure warnings, etc.
  • ToolGuy Is it a genuine Top Hand? Oh, I forgot, I don't care. 🙂