Obama Pick: Ford (F)

Posted Nov 5th 2008 3:45PM by Michael Rainey
Filed under: Ford Motor (F), General Motors (GM), Obama Picks

It may seem a bit of a stretch, but Ford (NYSE: F) could benefit greatly from an Obama presidency. And it's not because Barack Obama is going to start riding in Lincoln presidential limousines like JFK and LBJ famously did.

Rather, Ford could benefit simply because politically, Obama can't afford to preside over the complete collapse of the American automotive industry. And that collapse is looking more and more like a very real possibility.

The Center for Automotive Research issued a report today analyzing the potential effects of serious cutbacks at the Big Three. If Ford, General Motors (NYSE: GM) and Chrysler were to cut production collectively by half, the result would be a loss of two and a half million jobs. If all three gave up the ghost entirely, over three million jobs would disappear in the first year alone. These are staggering figures. The impact on personal income and tax receipts would be enormous.

Unfortunately, these numbers have to be taken seriously given the state of the industry. As David Cole, the head of the Center for Automotive Research, said, "The likelihood of one or two of the Detroit Three manufacturers ending operations is very real."

At this point, Chrysler is probably the weakest of the Big Three, and Ford is probably the strongest. That suggests that Chrysler may be forced to pay the price of excess capacity -- and bad design and management -- in the American auto industry. But Obama can't afford to let all of the car companies die, and so his administration is likely to intervene with massive aid to save Ford, and perhaps GM.

It helps too that some analysts are turning bullish on Ford. Andrew Snyder at Seeking Alpha argues that Ford is well on its way to becoming a leaner manufacturer and that its worst days are behind it. And Ford is so confident in its new F-150 that it recently rehired 1,000 workers.

So weak as it looks now, Ford may end up leading the way forward for old line industrial companies during the Obama years.

Tags: 110508, Chrysler, F, GM, Obama

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Reader Comments (Page 1 of 1)

11-05-2008 @ 7:53PM

bt said...

Ford, GM & Chrysler can go into bankruptcy and void the crazy Union contracts that have dragged the American auto industry down. Management is also to blame but they were forced to diversify into other businesses to make money due to excessivley high Union contracts.
Obama will tax the American public until we bleed to bail them out. If you make over $200k to $250k per year, your better off negotiating stock options instead of pay increases or bonuses. Start investing in triple tax free bonds or the Grim Reaper will transfer your wealth.

11-05-2008 @ 8:34PM

barb westendorf said...

McCain seen driving a Toyota on tv today,how American for someone wanting to be in charge of our country,does he know the auto industry is the economy(major), in Ohio also as well as other plant closings in other states.Guess he dosnt care.Thats why i voted for Obama,and yes im middle class white

11-05-2008 @ 9:41PM

BoboTheClown said...

Even if the Dems bail out Detroit, I'm hard-pressed to see how Ford common stock would be a good long-term investment. The bailout would probably either be a big loan or perhaps preferred stock, either of which would consume any possible profits for years, leaving common shareholders with zip.