Ford's Flying High, But Staying Grounded
What’s that up in the sky? Is it a bird? Is it a plane? No, it’s the blue oval! Yes, everyone favorite car company is flying high. Fresh off the news that it made $1.7 billion between July and September and that they paid off some more of their big debts, people are talking big of Ford. “They’re in the best shape that they’ve been in for years,” said Shelly Lombard of Gimme Credit (I checked it out, they have their own website) via TMCnet.com. But Ford, through whatever reason, but I reckon it’s fiscal prudence, is staying cautious.
Bloomberg reports that Ford’s CFO Lewis Booth isn’t entertaining the idea of paying dividends anytime soon. “Paying a dividend is some way off yet,” said Mr Booth, “We still have a lot of work to do on our balance sheet.” While Lewis remained tight lipped on dividend paying, analysts tried to have a go and predict. John Murphy, an analyst for Bank of America, wrote that it will be dividends “by 2012 at the latest”. Bloomberg, also predicts 2012, but they go a stage further and predict that Ford would pay 5 cents a share. The future is looking good for Ford. Paying down their debts continually reduces their interest obligations and Ford cars are gaining market share. Personally, I’m staying cautious. If, as I think, another recession/crash is going to happen, will Ford’s recovery collapse? Toyota still has money in the bank, GM has a rich sugar daddy. Volkswagen is super strong. Has Ford done well? Absolutely. Do I think the worst is over? No-frigging-way.
A large portion of Ford's current US success is due to the last decade of their work in Europe, so in a sense, it's just a continuum of diversification.
They can't fly, they sold the corporate jets, remember? I like how a lot of Ford's profits are going towards paying down debt early. Money in the bank is a good thing, but if the market tanks again, it's probably going to be more beneficial to have lower fixed costs due to reduced interest payments. I think it was a missed interest payment that really pushed GM's troubles into the public eye.
I do not buy the big Detroit comeback story. The latest CR reliability result shows every Toyota and Honda brand is more reliable than every Domestic brand. The real story is the left wing Obama loving media is trying to show the voting public that the massive billions pumped into GM, Ford, and Chrysler, as well as the suppliers ( guised as a small business initiative ) was smart. The truth is this money was a big favor for the UAW. The Ford brand ranked 10th out of 27th reliability in CR. Not a good result.
Not a great result, but it's still much better than average. I may never see a Scion on fire, but even if I do I still won't piss on it.