Ford CEO Alan Mulally
Talk about a turnaround! Ford shares sank to $1.26 in November, 2008. At the close of trading Wednesday, the stock price was up to $14.00/share. That’s a major-league turnaround in an industry racked with sagging sales due to the current recession and after-effects of the financial meltdown which preceded the last Presidential election.
Bond rating upgrade
According to a report in The Detroit News, Moody's Investors Service upgraded Ford Motor Company's credit rating, along with that of its finance arm, Ford Motor Credit Company. Another upgrade could be forthcoming.
The upgrade in bond rating is significant because it will allow Ford to borrow funds at a lower interest rate. This will also have a beneficial effect on Ford’s captive finance arm, Ford Motor Credit Company.
Under-promise, then over-deliver
While Bill Ford, Jr. made promises to stockholders he was unable to keep, current CEO Alan Mulally has done the opposite by beating projections and exceeding expectations. According to an Associated Press report, Ford posted an unexpected $2.7 billion profit for 2009, which was the first time the company posted a full year profit since 2005.
Furthermore, the company reversed a 14 year slide in market share which began in 1995 and ended in 2009. That’s no typo. Ford lost market share for 14 consecutive years. Kind of makes one wonder what they did to mark the anniversaries – the 5th or 10th or 12th straight year of market share losses. Maybe the Board of Directors ordered cake and ice cream from Westborn Market. Hopefully the nightmare is over. (Westborn Market is an upscale food store in Dearborn, close to Ford's WHQ.)
What the press release didn’t say…
While all this is good news, one has to keep things in perspective. If $14.00/share sounds impressive, consider that many current investors hold Ford stock purchased when the price was more than twice that amount - and paid dividends. Dividends are a key source of income for many Ford retirees who continue to hold their stock in hopes of a turnaround.
In addition, investors who received shares of Visteon stock when Ford spun off their parts manufacturing arm lost virtually everything when Visteon declared bankruptcy. And don’t forget, Ford is still staggering under a mountain of debt which, at the end of 2009, was in excess of $34 billion.
Future prospects
This author is guardedly optimistic about Ford’s prospects going forward. Alan Mulally deserves a pat on the back for reversing a decade-long downward slide. If, however, the nation lapses into a double-dip recession, or if gasoline prices climb above $4.00/gallon, all bets are off.
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Photo: Ford Motor Company
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