Ford Motors: A Bargain or A Beast Soon To Die


Just a quickie: Ford Motors is now trading in the high sixes: $6.81 today. Yeah, they are bleeding money, seem to have cut the dividend and don't really have any new or interesting cars in the pipeline. (Can you say lousy product development?) My question is this: is this a bargain in the sixes or will it fall further? More so, will Ford even make it? There was a time in my life when the idea that an American car company would be allowed to fail was so far outside the realm of possibility that I'd not even bat an eye buying at this price, but now? I just don't know. An even more important question is what does it say about us that Ford would be allowed to die? Because I don't see an LBO/Private Equity savior/slayer on the horizon. Just thinking out loud, is all.


Sean Paul Kelley December 18, 2007 - 5:37pm
( categories: Analysis | Economics: USA )

Agree with you on the product line. I should have kept the 1965 Mustang. Doesn't the two classes of stock make it less attractive for a
LBO?

steelhead December 18, 2007 - 5:55pm

Quality for Ford is actually quite good this line, but their efficiency sucks rocks.

Ian Welsh December 18, 2007 - 6:25pm

Getting rid of Aston Martin and now Jag are good moves. Why they don't save some money and park Mercury in the garage is beyond me though.

I'm a huge Ford fan, but that is all based on history. Aside from the Mustang there isn't much out there in the current U.S. lineup that is being done better by others. (They discontinued the GT40 remake.) :( And the Mustang will likely lose share to Chrysler's Challenger and GM's Camaro in the very near future.

I see Ford underperforming for the near and long term though. Near term looks like today. Long term, when China comes online, unless they move their plants there, so sorry. I know there is a GM Shanghai (you can't help but notice the Buicks all China) but I'm not aware of Ford's China push.

dot_txt December 18, 2007 - 11:47pm

have held the Buick in esteem for a long time. Ford has no bellwether there; it will have to create one.

I think Ford will survive, but I have no idea if it will flourish.

http://mauberly.blogspot.com/

mauberly December 19, 2007 - 10:16am

have you seen their ads touting -raving- about their Edge getting 24 whole mpg ?? they're so out of touch they deserve extinction... the only surprise is they've hung on so long.

hjmler December 19, 2007 - 1:40am

I'd think that the light truck division would be something that would be worth acquiring. You see lots and lots of F150/250/350s out here and there are some very fierce Ford truck loyalists.

Perhaps Ford can raise some cash by selling the passenger car division of Volvo. Heaven knows, that marque has gone to hell since being acquired. Time for some new ownership to bring back the "old" Volvo.

Petronius December 19, 2007 - 11:12am

and a lot to do with expenses outside their control. Until the health care situation is somehow resolved in the USA, all manufactoring jobs will continue to suffer. Ford is bent over the medical insurance table like the rest of us. For them though, the pain is great enough to make them have to cut corners and do what they must for the bottom line.

Fixing health care won't immediately fix Ford, but until we do tackle that issue these companies will remain broken.

zot23 December 19, 2007 - 11:30am

decisions vis-a-vis healthcare issues, with the subtext that those damn union workers are too greedy. Nevermind the fact that management at Ford sucks, the product line pretty much sucks and they don't have a decent product pipeline to speak off.

Yeah, all the unions fault.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley December 19, 2007 - 1:03pm

From a December 19 AP story:

DETROIT — General Motors Corp. is offering buyouts and retirement incentives to 5,200 hourly workers represented by the United Auto Workers.

GM would not reveal how many workers it expects to leave under the program, but said 5,200 are eligible, spokesman Dan Flores said Tuesday.

More than 34,000 GM workers left last year by way of retirement or buyouts, he said.

The program announced Tuesday will be offered to all UAW-represented hourly employees working at GM's service and parts and operations facilities across the country.
...
GM wants more than 16,000 hourly UAW workers to exit the company. Many would be replaced by workers at the lower tier wage scale approved under a landmark four-year contract with the union. Such new hires would be mainly in non-manufacturing jobs and would receive reduced health care and pension benefits than the workers they replace.

GM anticipates replacing higher paid workers with entry-level employees who will make less.

Current UAW employees earn about $28 an hour, while entry-level wages begin at about $14-$15 an hour, Flores said.

"Certainly, we are focused on cost-reduction efforts," Flores said. "In the U.S., it's a competitive marketplace and customer demand is softening. There is an urgency to cutting costs as quickly as we can."




I'm curious as to how much skill it takes nowadays to be an auto assembly-line worker, as compared to say, 1960. Anyone have any first-hand knowledge? Automation certainly must have simplified a lot of tasks.

Petronius December 19, 2007 - 1:27pm

Back in the Good Old Days when the American auto industry had no competition, the overhead costs per vehicle were neither particularly huge as a percentage nor difficult to pass on to the customers. There was also laws and loopholes in laws encouraging employers to enact paid employee benefits rather than to rely upon wages alone as a recruiting tool.

No one forced U.S. manufacturers to provide health insurance at no cost to their workers; it was cheaper than jacking up wages and the accompanying payroll taxes. Win-Win.

Of course, health care costs have increased from 5% of GDP in 1963 to 14.4% in 2001. And the domestic market share of U.S. automakers has dropped from 93% to 65% in the same era.

Hasn't really been a seller's market since the early 1980's.



Turn back to the Constitution - and
READ it.

Rick December 19, 2007 - 2:54pm

the healthcare issue it is a red-herring for what's "really wrong" with the automakers, Unions. So, perhaps I overreacted, but then again, I am a cubicle boy now, so make of it what you will.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley December 19, 2007 - 10:12pm

I didn't read the post as Union swipe but as a swipe at our healthcare mess.

Rojo December 19, 2007 - 4:30pm

Go to your cubicle, young man!


"The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential."

- Dietrich Bonhoeffer

Escher Sketch December 19, 2007 - 4:37pm

That's veal-fattening pen.

Forget it, Jake - it's AmnesiaTown

Tonsure Wimple December 20, 2007 - 4:37am

*cough*


"The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential."

- Dietrich Bonhoeffer

Escher Sketch December 20, 2007 - 11:11am

If not, then Ford will continue to decline. Gas prices and global warming are pushing the market away from pure internal combustion engines towards pure electrics; Ford's only acknowledgment has been to sell a hybrid Escape. Good move, but not good enough.

If I had money to invest, I'd be looking for companies like Tesla Motors or battery tech companies. Detroit better wake up before it's entirely too late.
.
"Adapt or perish." Murphy's Law? Nope, Darwin's Guarantee.

Jimbo92107 December 19, 2007 - 1:02pm

Ford does make money outside the US, even with unions. Aston Martin was the only car that made money and they recieved some good money for but Jag to much bad management and that was the same thing that happen to them here. I think the kid is headed on the right path and the union has a seat on the broad so they know what coming. They have a very interesting project being worked on in Dearborn and Cal-Poly. It will be tough but they seem to be able move in front of GM and under new ownership who knows what happens to C. there no more deep pockets from Euro land.
jo6pac

jo6pac December 19, 2007 - 7:44pm

The first we bought was a Ford Windstar. The salesman touted it as being proven technology because the drivetrain was the same as their (at the time) proven Taurus model. Had I had my thinking cap on when we bought it I might have asked whether drivetrain was up to the additional weight of the larger vehicle. A blown transmission and head gasket proved it was not. Ford paid for the repairs and basically gave us another car which also failed due to tranmission problems. We now have a Honda minivan. No problems.


“I despise ideologues masquerading as objective journalists.” - Bill O'Reilly, March 30, 2007

Mark December 19, 2007 - 11:03pm

Very practical design, lower curb weight and good mileage.

Petronius December 20, 2007 - 4:41pm

'mini' SUV's - Subaru Forester, Honda CRV, Toyota RAV4, Ford Escape. Good, fun and practical cars all.



Turn back to the Constitution - and
READ it.

Rick December 20, 2007 - 10:14pm

My three brothers, parents and I drove half way across the country many times in a white station wagon. I guess we were very Brady Bunchish. :D

Tina December 20, 2007 - 11:17pm

and it's about time someone tried to make an electric one.
might as well be ford.

i love the honda shadow bikes. there are no equally cheap american bikes and there oughta be. ford comes to mind.

Zuma December 20, 2007 - 10:47am

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