The Wheels Come Off, Again, In Detroit
Stocks: (GM)(F)(DCX)
At the beginning of the year, GM was a poster child for the bankruptcy of a big American auto maker and Ford was considered in decent shape with the Ford family repeatedly saying the Chapter 11 was not an option.
The landscape has shifted. Ford's debt was recently downgraded by S&P, and even the company CEO admits that the turnaround he has championed is not on track.
What happened between the beginning of the year and now is that incentives have returned. The Big Three have repeated renounced incentives as an option to stimulate sales, but with inventories up and sales down, all three car makers are moving to zero percent financing or employee pricing for all customers.
One would think that with Ford cutting over 10,000 employees through buyouts and GM dropping over 30,000 hourly workers that the hundreds of millions of dollars in annual saving would be enough to get the car markers' North American operations back into the black.
But, the drop in SUV sales and pick-up truck purchases is pounding the American manufacturers and the hurt to Ford is particularly acute due to the high percentage of these big gas inefficient vehicles in its mix.
GM has the slight advantage of having its price-per-vehicle up about 5% in the first five months of this year. That at least gives the largest car company a small buffer.
Chrysler, due to its parent Daimler Benz, has the advantage of a company that owns the Mercedes line of cars and other businesses.
Ford's stock has been beaten like a red-headed mule. The shares have dropped from a 52-week high of $11.19 to the current low of $6.34. The company's market cap is an appallingly low $12 billion. This for a company with annual revenue of over $177 billion.
If the next few months show that Ford's big SUV and truck sales continue to drop, the stock has not seen its bottom.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not won shares in companies he writes about.
At the beginning of the year, GM was a poster child for the bankruptcy of a big American auto maker and Ford was considered in decent shape with the Ford family repeatedly saying the Chapter 11 was not an option.
The landscape has shifted. Ford's debt was recently downgraded by S&P, and even the company CEO admits that the turnaround he has championed is not on track.
What happened between the beginning of the year and now is that incentives have returned. The Big Three have repeated renounced incentives as an option to stimulate sales, but with inventories up and sales down, all three car makers are moving to zero percent financing or employee pricing for all customers.
One would think that with Ford cutting over 10,000 employees through buyouts and GM dropping over 30,000 hourly workers that the hundreds of millions of dollars in annual saving would be enough to get the car markers' North American operations back into the black.
But, the drop in SUV sales and pick-up truck purchases is pounding the American manufacturers and the hurt to Ford is particularly acute due to the high percentage of these big gas inefficient vehicles in its mix.
GM has the slight advantage of having its price-per-vehicle up about 5% in the first five months of this year. That at least gives the largest car company a small buffer.
Chrysler, due to its parent Daimler Benz, has the advantage of a company that owns the Mercedes line of cars and other businesses.
Ford's stock has been beaten like a red-headed mule. The shares have dropped from a 52-week high of $11.19 to the current low of $6.34. The company's market cap is an appallingly low $12 billion. This for a company with annual revenue of over $177 billion.
If the next few months show that Ford's big SUV and truck sales continue to drop, the stock has not seen its bottom.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not won shares in companies he writes about.
posted by douglas mcintyre at 9:20 AM
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