This post is written as part of AOL Money & Finance's Best & Worst 2006. If this post convinces you that Ford can make a comeback, cast your vote.
Recently I wrote a blog post about some of the nice things Ford Motor Company (NYSE: F) is doing. It was just an overview and the article was cursory at best. A member of our excellent editing staff suggested that I might have readers who want a bit more explanation of just what has happened with Ford's stock market value over the last year. I think that for an even better perspective, I'll need to take you back ... way, way back....
Ford Motor Company's stock value entered this decade at $29.30 (the actual per share value was $53.51 but there's a split adjustment factored in). By the end of 2000 Ford stock had slipped to $23.44. One year later the shares had deflated to $15.95 and by the end of 2002 investors were viewing in amazement a stock value of just $9.58. In 2003 Ford took an upswing and shares ended that year at $16.18. But 2004 ended at $14.80, 2005 nearly halved that value to $7.90, and 2006 is shaping up to finish with Ford Motor Company shares close to today's ending price of $8.13. Two factors that must be considered when viewing this historical trend are: In 2000 Ford's daily share trading volume was in the range of 3,300,000, whereas yesterday's trading volume for Ford was over ten times that much at 30,530,400 shares. How do total share availability and volume traded affect the overall price? I'll honestly tell you, that information is just plain "over my head."
For the sake of this article I'm going to take a layman's uneducated guess and say that based on what I've seen, Ford's stock value right now should be around $14.00 to $16.00. That will at least give me a value to point at and say, "Well, then why isn't it that?" Let's take a short look back to see what things may be affecting investor perspective, then we might get a feeling for why Ford's stock isn't doing any better or why it should be.
Based on available figures, Ford ranked as the third largest auto maker in 2005. Ford has also been listed as one of the world's ten largest corporations. As late as 1999, Ford still maintained standing as one of the world's most profitable corporations. Therein lies our first revelation, Ford just isn't quite that profitable at this time. Profitability generally supports stock value. Even a rank amateur like me knows that. Additionally, the size of Ford's piece of the North American market share pie has not increased since 1995. These are certainly not signs that a company is crumbling, but they are facts that will most definitely color investor perception.
On September 5, of this year, William Clay Ford, Jr., stepped down as Ford's CEO and named Alan Mulally as his successor. There was not much fanfare surrounding the change, but as expected it was widely covered. Alan Mulally is a no-nonsense, straight-to-the-point type of leader. He came to Ford directly from Boeing Corporation, where he held the title of executive vice president. He was also CEO of Boeing Commercial Airplanes. He began his career with Boeing as an engineer. He has come up through the ranks as a time-tested and honor-driven company man. He's a natural choice for this job. He came to Ford knowing that the odds are tipping against American manufacturers in an increasingly tough world economy. I don't think he's afraid. He has seen most all of this before. He knows his way around business and government. I think he's a good fit for the job.
Ford has announced its intent to produce over a quarter million hybrid cars by 2010. I'm already thinking it will surpass that. Given the enormous surge of interest in green vehicles and the quickening competition, I expect Ford will accelerate its program. When green vehicle technologies first entered into the realm of production reality, consumer reaction was stunted. Now, as high-quality, tangible examples are showing up in showrooms, and they're looking good, the public is stepping up its interest. If Ford does even just an acceptable job of steering into this new market sector and provides vehicles that are up to previous standards, I see no reason why Ford and all American auto makers cannot capitalize on hybrids in a big way. These hybrid vehicles will not be just a passing fad. These automotive wonders will be the leading edge of tomorrow's transportation technologies. A decade from now OPEC will be little more than an annoyance.
Are better days ahead for Ford? Would I like to own their stock? To both those questions I say yes, and if I had the money I'd buy some shares right now. At the closing price of $8.13 a share, I'd like to think I know a bargain when I see one. Whether I'm right or wrong only time will tell, but I'd plunk some of my money down. I think Ford's a no-lose proposition. If the bit of insight I've given right here isn't enough to sway you, then I'll sum it up in this one final statement: I'd wager my next paycheck on Ford to win. And folks, I'm not a gambler.
5-Hour Energy: A Success Equal Parts Caffeine, Chemistry and…
Suddenly, Amazon Doesn't Love Its Moms Anymore


Reader Comments (Page 1 of 1)
12-12-2006 @ 2:29AM
theodor tchorzewski said...
you are correct ford is making big changes and they will bring a lot of profit; however, they forget that it would be good to make money while changes are being made into the future, the removal of the taurus car at a time when ford could use sales makes no sense. ford bought and paid for this car and i was them i would have sold this car until their next generation cars were ready, not forgetting that that the taurus where already slated with all alcohol engines which would make it a seller for another decade. i dont think an automotive engineer should be heading an automotive company. lets get back on track and keep americans thinking buy america. remember american workers make great customers.
12-12-2006 @ 2:30AM
John L Johnston III said...
A decade ago Ford had GM on the ropes and failed to go in for the kill. Instead Toyota saw an oportunity and went after both of them. Ford never saw it coming. GM did and moved to solve their problems. In the market place it was quality. In the 1980s GM would tell a customer complaining about a shoddy car, that it was "Commercially acceptable." No longer. Ford will recover when and only when they deliver a quality car. It may be too much to expect Mercedes quality at a Ford price point, BUT they damn well better deliver Toyota quality at a Toyota price. Or it will be R.I.P. Ford. I look for Mercury and Jaguar to follow Plymouth and Oldsmobile very soon.
12-12-2006 @ 12:05PM
John Cameron said...
Nice article Mr. Sattler, but quite frankly I am dismayed at your lack of understanding as to why Ford's stock price has declined over time. There is one reason, and only one reason, to explain stock price movements (excluding short term hype), and that is earnings. This is a proven investment principle.
Ford's earnings, or lack thereof, fully explains the stocks downward spiral. Further complicating this is the announcement by Ford that there will be no bottom line earnings until 2009. This is a projection only, and the market does not like the uncertainties of projections.
Thanks again for your article.
12-13-2006 @ 1:47AM
ben said...
ford is one of the largest and moast well knowen and liked company in the world.there is no chance this successful company is going to loose its reputation. just remember all their great designs and innovations from the model T through to the mustang GT or even just the simple things like henry fords interest in soy beans which has led to a whole development team dedicated to soy innovations and products. there contribution to history is immence. all good things dont have to end,like the universe it can go on for ever.
12-14-2006 @ 12:26AM
Chris said...
I just bought a Honda, and was very upset that I couldn't spend my money on an American-made car because the American models did not match up in the latest Consumer Reports issue.
Americans need to buy American brands in order to keep our country strong, but the American companies need to stop slacking off and get with the program -- or we'll be left in the dust. If Ford's models could have matched up in the Consumer Reports, there is no doubt I would have chosen a Ford over a Honda. In any case,I am planning to purchase F shares because I believe the company is finally trying to revamp and get back on track. The question is: how long will it take?
12-18-2006 @ 12:03PM
Ronald said...
A few years ago I was a Ford stock holder reinvesting my dividends In Ford stock. Then Ford got greedy and decided that reinvested dividends by stock holders was not enough. Ford put a price of $3.00 each quarter to reinvest dividends. I found it was costing me $3.00 to buy a portion of a share. A share they were buying on the open market for penneys a share. Ford does not care about their stock holders.
12-29-2006 @ 2:08AM
Bob said...
This article seems to have overlooked the boycott against Ford by about 650,000 Christians who signed the petition issued by the American Family Association. I would say that the number of co-workers and friends and family that got word of mouth from the petitioners could bump the total significantly. Ford reneged on a promise to stay neutral in the cultural wars in our country, and they are paying the price for their corporate arrogance.
12-29-2006 @ 2:17AM
Bob said...
I was employed at Boeing for 33 years, retiring as an Executive Manager. Mullaly was by far the best manager I ever worked for. I am convinced he will fix Ford and as soon as I sell another stock I am buying Ford. Like others who commented, I will buy a Ford in place of my Subaru when Mullay produces a quality car at a competitive price and warranty.
1-07-2007 @ 11:24AM
ROGER said...
Thank God William Clay Jr, was booted out. This kid was born with a silver spoon in his mouth and never ever had to work or learn what it takes to be a leader. The Ford Family put him in power because they felt more secure having a Ford in control. I've been a Ford man for fifty years. I own 6000 shares of Ford but I'am very woried about my investments. I can not wait until 2009 to see this stock double. I believe in the new Ceo and I'm going to hang in for a while longer. Oh get a better advertisement agency. Ford your losing the add war, BIG TIME.
Roger From Motown
3-07-2007 @ 12:35PM
Pat Burke said...
Thank You for the article and helping put faith into an American icon, and keeping the article simple for someone like me that has little understanding of how the market works. I do not own a Ford, I just want to say thanks for the refreshing view of one of the big three.