Themes: Automakers, Ford, GM, Chrysler
If you’ve been following the woes of the auto sector, you’ll know that two of Detroit’s ‘Big Three’ auto giants are in a bad way. Bankrupt General Motors and Chrysler have had to put their tails between their legs and take $70 bn worth of financing from the US Treasury to restructure.
Ford tells a different story. While the car industry was brought to its knees in the financial crisis, it was the only automaker to decline Uncle Sam’s bailout money. It recently surprised us with a $2.3 bn profit for the second quarter of this year. And its shares have been on an uptrend since April.
Take a look at the chart below. It shows year-to-date performances of Ford (red line; ticker: F), Chrysler (green line; ticker: DCXX) and GM, now known as Motors Liquidation Co. (black line; ticker: MTLQQ).
Ford’s share price surge has been impressive, more than quadrupling since its Feb low (circled). GM’s stock on the other hand, dived to a 75-year low in early-March (also circled) – and has suffered since.
Ford’s survival strategy has supported its upward swing
Source: Financial Times
So why has Ford survived this mass wreckage? Well, it prepared ahead, raising cash three years ago when credit was still available. And it sold off units when there were still buyers.
Keep in mind that the US automaker still has a significant debt pile. And it isn’t going to return to healthy levels of profitability this year or the next. But its CEO Alan Mulally does expect this to happen by 2011 and we’re inclined to agree.
What a difference a year makes. Fiat now runs Chrysler. As for GM in its new skin, we could expect to see an initial public offering (IPO) of stock in the restructured company next year.
And of the Big Three, Ford has emerged as the most resilient. If it continues to grab market share from its rivals and auto sales pick up, it’ll be one to watch.
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