This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
This may be perhaps the most surprising article in this series as few investors realize how huge Toyota Motors (NYSE: TM) is, especially when compared to Ford Motors (NYSE: F). Toyota sports a stock market valuation of $168 billion, 12 times the size of Ford's market cap of $13 billion. In fact, an even more surprising statistic: Toyota is 8 times larger than Ford and General Motors (NYSE: GM) combined!
Toyota has recently surpassed GM in annual unit sales of cars and trucks. Toyota sold over 9.3 million units in 2007 and has 16% market share in the United States. In spite of the difficult environment that all auto makers are facing with the economic slowdown, Toyota is poised for future growth with its cutting-edge line-up of hybrid autos and trucks. But, not too far behind Toyota is Ford. The company has perhaps a much brighter future than its main U.S. competitor GM. Ford has taken the necessary steps these past 21 months under the leadership of CEO Alan Mullaly. He was the president and CEO of Boeing's (NYSE: BA) commercial plane division.
Mullaly brings experience to Ford, but more importantly, he has a fresh approach and ideas from the aerospace industry. He has quickly retooled Ford by closing unproductive plants and expanding manufacturing in expense-friendly nations such as Mexico. Mullaly embraced hybrid technology and has positioned Ford as the American hybrid alternative to Toyota.
The auto industry is suffering terribly these days and this is reflected in the current market valuations of all the publicly traded auto makers. Ford's stock is at $5.80, a full $4 down from its 52-week high. Recently, Kirk Kerkorian's Tracinda Corp. made a sizable investment in Ford, paying $8.50 per share. Tracinda owns more than 5% of Ford's outstanding shares.
Ford, under Mullaly's leadership, is determined to weather the economic storm. The company has improved its line-up of product offerings with hybrids. The popular small SUV Ford Escape is now available in hybrid form. The city of Chicago is migrating its fleet of taxis to the Escape hybrid.
Ford is eying Toyota's leadership position with hunger and passion. The next 5-10 years should be extremely interesting as the auto world is changing and morphing onto a higher technology plane. Ford will be right there with the best of them ... watch out Toyota!
Georges Yared is the editor of GameOn Investing, a free service devoted to helping investors spot game-changing stocks before they breakout.











Reader Comments (Page 1 of 3)
6-27-2008 @ 7:25AM
Steve said...
an interesting thought, although it seems to me that FoMoCo has a great deal to overcome in that pursuit.
I've rented Fords and Ford products on numerous occasions, originally to do a little evaluation with an eye toward possible purchase, and my final conclusion after several days of driving under various conditions was ... NO FREAKIN' WAY!!!!
I wish the company well and hope they manage to accomplish this amazing feat, but I retain my doubts.
6-27-2008 @ 10:01AM
MW said...
"He has quickly retooled Ford by closing unproductive plants and expanding manufacturing in expense-friendly nations such as Mexico."
So, basically he is closing out American jobs and sending American workers to the unemployment lines, wile bolstering Mexico's economy. Great! Another genious CEO idea to save money, while wrecking the future for American jobs.
I do agree that they are on the right track moving on to cutting edge technologys, however.
6-27-2008 @ 10:27AM
Sheriff Buford Justice said...
Having worked for fomoco it will take a long time to come near Toyota. Ford will send jobs to Mexico. Toyota sends jobs to the USA, and still make a more efficient car, with better warrantys and customer satisfacrion.
Ford also better look at their dealerships. They need a lot of work, ask most people who have service done at Ford! They are terrible, new car sales have such a turn over in sales people it is unbelievable. Many case they have to bring cars back a couple times before they may find the problem. Sure they now have the escape hybrid, try and find one on the east coast, they send them to california. An example, they duiscontinued the Taurus and replaced it withthe 500. They realized their error, Taurus was the best seller, and they scrap it. They did wake up and bring the Taurus name back. PATHETIC!
6-27-2008 @ 11:41AM
jcorn said...
Cutting edge technology and cost-saving features for American drivers will have people voting with their dollars for sure. Thanks for an interesting read!
6-27-2008 @ 10:54AM
Parissa said...
Ford ~ and the majority of other American car makers ~ could, at any time, have come up with a car to equal a Toyota ~ but the majority have chosen, for proffit reasons, I assume (well, and throw in a bit of ignorance and lack of pride to boot) to consistently make inferior products! The only American made vehicle that I've purchased in recent years that drove it's heart out for my family and loved ones was a Chevy S10! I'm not sure all S10's are as good as the one we had, but when my husband traded it in on another S10, it was like losing a member of the family (it had over 210,000 miles before it just said, 'I've had enough folks!'). As for myself, I drove a Toyota pickup for better than 10 years ~ never a problem ~ EVER! I kept it in good condition, clean inside and out, and had it serviced regularly. It's 'death' came only when a drunken bar-fly smashed into it while it sat parked in front of my house and was totalled ... even Toyota's can't always survive drunk drivers. Thank God no one was hurt beyond the Toyota, but I STILL grieve for the loss of that vehicle! Good, luck Ford, in trying to 'equal' Toyota (or our previous Chevy S10!) You have quite a feat ahead of you ~ but it would be nice to be able to purchase an American made car ~ especially a Ford, given it's longevity and history ~ and REALLY be proud and confident that we've made a quality purchase! I just find it interesting that Ford is just now deciding to try to equal it's foreign rival! Why wasn't this considered years ago? Well, but then I'm not a CEO of anything but my own family ... what do I know? ;-)
6-27-2008 @ 11:47AM
jcorn59483 said...
I hope Ford can emerge again as a real contender and I'll be rooting for any company that can create the technology to help us all have superior technology and money-saving cars. Gas prices are hitting people hard, hurting badly. http://www.associatedcontent.com/user/106610/jcorn.html
6-27-2008 @ 12:44PM
Bob Wong said...
Foriegn auto makers are raping the USA. Foriegn auto makers enjoy the free market in the USA while Ford and GM face hugh barriers selling in foriegn markets. Even the playing field and GM and Ford will excel. Not likely given the current situation. Buy American !!!!!!!!!!!!!!!!!!!!!!!!!!!
6-28-2008 @ 10:30AM
Bill said...
Another company sending american jobs to other countries, that's great, just who do they think can afford to buy a ford, when all of our jobs are in forgein countries. I say move all of FORD to Mexico, then maybe they would outsource to the U.S.A.
6-27-2008 @ 1:34PM
Mitch said...
Mr. Yard is crazy. Wishing for Ford to be the new Toyota is one thing but predicting it will be the new Toyota - absolutely ridiculous.
This article is featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
Ford is smaller but it is in no way a more aggressive or innovative company than Toyota.
Ford is losing money hand over fist because it is not delivering the products that customers want. Ford is fighting for its' very survival and is living quarter to quarter.
Toyota, on the other hand, is making money hand over fist and delivering very desirable products. Toyota is strategically planning years and decades out.
Additionally, Toyota is succeeding by doing the little things right. Their corporate mantra is to continuously make things better a little bit at a time. No grandoise corporate makeover (again and again) but rather a simple (but not easy to master) strategy that is ruthlessly executed.
I believe your article is VERY misleading. I only hope people don't make investment decisions based on your prediction.
6-27-2008 @ 1:45PM
STEVEN THOMAS said...
F O R D
Fix
Or
Repair
Daily
True ------30 years ago
True-------NOW!
6-27-2008 @ 1:47PM
STEVEN THOMAS said...
Ford is in Mid Life Crisis!
6-27-2008 @ 4:32PM
gumbo koontz said...
As I see that way, Americans are losing interest in GM and Ford cars since UAW workers are being laid off or bought out just out of brotherhood and spirit. But Americans are buying Toyotas and Hondas that are built by non union workers here in America without regard to the union brotherhood but just for better quality being afforded by Toyota and Honda management due to cheaper labor here because of lack of union wages and benefits. Americans are getting too discreet with political economics..
6-27-2008 @ 8:46PM
Terry Campbell said...
Well I think the japs should build all your war machines, don't you.
6-27-2008 @ 4:42PM
gumbo koontz said...
What I mean is that GM and Ford had been too generous to UAW workers at great costs to the quality needed to remain competitive with Toyotas and Hondas. GM and Ford never fought with UAW at all. Management chose to slither away with shoddier materials and suppliers on contracts until UAW found themselves out of jobs. Recently UAW workers are given fat cash wads to call it quit for good. GM and Ford models are improving again now. I can just hope that it will not be too little too late. I sent emails to Investor Relations at General Electric, yes GE, to consider buy General Motors or Ford Motors and give support until they get strong again and then IPO them or keep it . GE will make a nice profit if GM or Ford start winning back market share. I just know that Americans can beat Toyotas and Hondas only if UAW stop sticking its fat nose into the books..
6-27-2008 @ 5:09PM
Rich said...
It's hard to ignore Mr. Mullaly's corporate track record and he has been spot on with his ideas and leadership. In this case, timing is everything and if this super spike of oil prices would have occured a year from now, Ford would be in a great position. It will be introducing the "eco-boost" engine, in mass, within a year and the eco-boost engine gets 20-25% better MPG's. Too bad it's not here now.
5-10 years a lot of things can happen but Ford will have to weather this storm. Stock closed at under $5.00----hmmm.
6-27-2008 @ 9:29PM
oldman said...
Buy your Foreign made cars and pray we never again need our industrial capicity,as demonstrated by WII.
6-28-2008 @ 12:08AM
carjock said...
One thing for sure, Ford has equalled Toyota's quality levels. And, the Toyota dealerships just don't have the same passion they used to have. My sister-in-law can't get her Camry fixed and she has tried several dealerships. With regard to the future, as a former car engineer, we lived through these up and down cycles many times. Ford worked on a Sodium Sulfide Battery in the 60's, and electric vehicles in the late 80's. The battery always was the weak and expensive link. Fuel cell powered vehicles were actively worked on in the 80-90's. But Fuel cell's are a mile a way from being user friendly, and the engineering challenges are many and great - and dangerous if you fail. Ford will make it, so don't worry. Ford Europe and Brazil and Mazda are all doing great. The US is in a bit of a funk, but the strong will survive. And, those legacy costs are starting to hit Toyota and Nissan, so the cost differences are soon to be equalized. Furthermore, the Japanese stylists don't have a clue what great styling is all about.
Now, if Ford only stops cutting our retirement benefits which we signed retirement contracts for, we might even be able to afford anotherone ourselves.
6-28-2008 @ 7:15AM
chas said...
Good news. This redoing of F is loing overdue. Un ford it into these new times.
6-28-2008 @ 10:54AM
Jobu37 said...
Finally someone that gets it. This author has looked past the propaganda of the media and used facts to make comments about Ford.
6-28-2008 @ 12:40PM
Micro1234 said...
The author doesn't even realize how right he is. Two months ago the ascension of Ford was inevitable, but now that the full-size pick-up market has fallen off a cliff it has extended time frame out a bit before Ford starts hitting on all cylinders. Once the pickup market finds a level to settle at it Ford will be hitting on all cylinders. Reasons are below:
1) The author mentions hybrid technologies. And in December Ford will begin production of the redesigned Fusion/Milan/MKZ. Hybrid models based on Ford's 2nd generation hybrid system will also begin production. The 1st generation hybrid system used in the Escape is highly regarded and performs closer to EPA specs than most other hybrid technologies. The redesign of these mid-size cars includes improvements in all engines, the interiors, and exteriors. If artist renderings leaked to the press are accurate the change in looks will not be mild. These will be the most appealing mid-size sedans on the market. Even being the oldest model in the mid-size segment today the plant building these cars is at full-capacity. If the 2nd generation hybrid system even has a moderate improvement over the 1st gen Ford may very well need an entire assembly line just for Hybrid production. Additionally, production will not be constrained by battery or transmission production being limited by influence on the suppliers by Toyota which is the current case with the Escape Hybrid. There are 3 month waiting lists for the Escape Hybrid due to the fact that they can only get the components mentioned above in very limited numbers. The improved EPA numbers in the non-hybrid models will also lead to better sales for these models as well. In May, Ford sold about 25K units of these models. It is very likely that the new models combined with hybrid variants will be selling around 35-40K per month at higher transaction prices. Ford is currently running the numbers to determine where they can get the additional production. Right now the Louisville Explorer plant and the Flat Rock Auto Alliance plant are being considered as sights to augment the Hermisollo production. At max max production rates Hermisollo can produce 325-330k per annum. 15K of that production goes to South America so Ford will need at least one additional line running at max overtime to reach the 40K per month. With the ever changing automotive landscape combined with a mid-size offering that as a whole should be considered best in class it is likely that Ford will have to run two additional lines to meet demand.
2) In the coming weeks the 2009 Escape will hit dealer lots. Engine and transmission changes will result in the Escape/Mariner/Tribute being best in class in fuel mileage on both 4-cyl. and V6 models. These engines will also be best in class for horsepower in the 4-cyl. model which is best selling model in this class. Toyota will keep the HP crown on the V6 side but they sale about 2 of these a month since only someone with a deathwish would buy a SUV this small with a 260 HP engine. These "cute utes" are bought by the masses for economy not racing at your local dragstrip. The Escape has been catching up to the sales leader Honda CRV in the past few months. Once these upgrades are on the market Ford may very well be on top of the biggest piece of the CUV market. The Escape/Mariner/Tribute are already best in class in cabin quietness. With the new EPA ratings and HP numbers more people will test drive these vehicles and get to experience this highly desirable attribute.
3) Conventional thinking in the truck market is that once the dust settles the only true buyers of pick-ups will be those who need them. It just so happens that Ford trucks have always been America's work truck. Just look around your hometown and compare how many unwashed beaten trucks are Fords compared to other makes that are pristine in condition as if they have never had anything put in their beds. Ford was late to get into the luxury truck market but once they did they went all out made very much money in the process. Fortunately, in the middle of last year Ford shutdown their Norfolk truck plant. This left production available in Kansas City and Michigan for the F-150. Louisville is still there for F-250 and up. This year Ford has announced additional cuts in production in KC. The shift reduction at KC is being transferred to the new third shift, also in KC, for Escape/Mariner/Tribute production. Even now it may be possible that they have too much capacity. Time will tell. However, with an all new truck coming on line in October they should need the additional capacity for at least 6-9 months until sales fall back into there new comfort zone. A year from now KC may no longer produce any trucks. Just guessing.
4)Flex/MKS. These two vehicles are white space vehicles in that they are filling slots in Ford's lineup that have been bare in recent years. The Flex will pull in buyers from minivans and large SUVs. It also has the benefit of appealing to those who belong to the "Pothead mentality". Buyers of Honda Elements, any Volkswagen, and some of the Scion crowed. Even potheads grow up and overbreed. Some of them even make enough money to afford a vehicle priced like the Flex. The combination of moderate income and more kids than one needs could bode well for the Flex. Also the pathetic dumbing down of the Chrysler minivans recent refreshing won't hurt Ford either.
The MKS replaces the Continental that has been out of production for at least five years. It has every technological gimick one could ever desire and it appears to be pleasing on eyes. Ford seems well positioned to sale this model to some "old-timers" still holding on to their Continentals and it could pull some import buyers in with it's panache. 10,000 retail orders before it hit the market bodes well for this model as well. Both the Flex and MKS have high margins so their success should be a very profitable one for Ford.
5) Fiesta! This model will be the one that shifts things completely in the NA market. It is a B car that has the immenities that makes one want it for reasons other than fuel mileage. Although MPGs north of 40mpg are a given. None of the current B cars can reach 40mpg and in some cases have worse mileage than bigger C cars. Yaris, Fit, Versa, and especially Aveo provide no compelling reason for the public to buy them. But yet they are all selling like hotcakes. Officially, in early 2010 the Fiesta will change all that. Unofficially, late 2009 is my guess. To determine the impact this car will have all one has to do is watch it's performance in Europe in a couple of months and then China a couple of months after that. The current Fiesta is already the second largest selling car in Europe now and it is runnin on a 10 year old platform. It will become number one over their instantly. By the time it arrives in the US market the conditions will be ripe for this model to sale 20K+ per month. Currently no B car can touch those numbers and due to constraints at the Japanese plants that produce these models it will be a year plus before more units can be allocated to the US market and by that time all of the Asian models will be second and third rate in comparison to the Fiesta. And in the case of the Daewoo/GM entry, fourth rate.
6) Current Focus is selling as many as they can produce and achieving profitability.
2010 the Euro Focus arrives to replace the already hot US Focus. It will move up in price point to make room for Fiesta.
Edge/MKX still solid. Still number one in the segment in spite of new Murano and Highlander being introduced this year.
Mustang due for a redesign in 2010. Ecoboost engines will make 4 cylinder versions of this muscle car very hot property.
Ranger may have production extended due to resurgence in demand. Not only in US but in Canada they are buying the thing like it is a brand new model. The tooling for this model was completely paid for like 6 years ago. They makey bunches of money on it and even today it is the perfect size for what most Americans use trucks for. Going to Home Depot. The four cylinder model realistically gets 30 mpg on the highway with a manual tranny. This makes this model the best of both worlds. Weekly commuter and weekend hobbiest's perfect car. You won't impress anyone on the stylish interior but you won't be out a ton of money when you buy one either.
F100 - the replacement for the full-size leisure pickup with just enough capability.
Expedition/Navigator - maybe extinct but then so will all the competition. Moving to F-100 platform being considered.
Taurus/Sable - currently class leaders in a dead segment of the auto industry. The D segment. However, due to incredible EPA ratings on this model sales have ticked up while competitors such as Avalon, Maxima, and 300 are in a freefall. These cars really are the perfect replacement for those that need space of a mid-size SUV. This due to the trunk that can fit a Honda Fit in it and the higher seating that is closest thing to the high ride of a SUV. New model to brought out in 2010 that is supposed to extend Ford's lead in the segment even further. Maxima has introduced a new model but it goes more towards the performance side which will appeal to a small niche at best.
In conclusion, everyday the perception of import superiority wanes a little bit more. And Ford has been doing things the past 3 years that positions themselves to best benefit from reality sitting into the automotive industry. Ford has already raced to the top of initial quality. Year after year of hearing about Ford improving quality more than the industry average will eventaully sink in. And those buyers who have had the chance to experience for the past 3+ years are just about ready to re-enter the market. With the appealing models that Ford has availabel to them now and in the near future it seems reasonable to expect alot of repeat business.
The reasons above along with others too numerous to mention explain why at prices below $5.00 one would be ignorant to not be buying as much F stock as they can get their hands on. I know I am. Maybe this will shed some light on why Mr. Kerkorian is making the play that he is.