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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.
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Reader Comments (Page 3 of 3)
9-08-2008 @ 1:49PM
Elizabeth Ulirsch said...
I grew up in Detroit with a father that held a high executive position in the Auto industry (I won't say where). Unfortunately, I began witnessing the demise of the American auto industry starting 20 years ago, while growing up. When the American auto industry was on top, they touted their arrogance by hiring either Japanese or Chinese engineers out of school (they loved MIT) and pulled out the red carpet and trained them fully and gave away their secrets. The idea was that there was no way possible of anyone doing better than them.
Sorry to say, the industry had by all accounts the ability to foresee the future. Instead, there are many senior executives asleep at the wheel and making millions in the meantime.
The demise breaks my heart and unless they merge, I have my doubts.