Ford Motors Inc. (F)
Why would anyone in their right mind believe that a company that just posted a quarterly lost greater than some third world country’s GDP is good investment? The answer lies in the restructuring plan. Look at GM, about 6 months ago, the company was in the exact same position. GM fired a large chunk of their employees and sold off some of its units such as their GMAC financing and several others. Six months ago, GM stock was trading at $22 and is now at $36. The interesting thing is, GM hasn’t gain any market share. However, they have managed to stop the bleeding. Imagine if GM were to report a profit, the stock will probably be in the $40 range, easily.
Back to Ford, the first part to solving any problem is to admit that the problem exist in the first place. The hiring of the new CEO is a positive move. Bill Ford was a good CEO, but his weakness was emotional attachment. He didn’t have in him to fire employees when he knew it had to be done. Time was wasted. The recent restructuring plan that was announced is necessary to turn around this company. Firing employees and closing plants is terrible for the local community, but it is a necessity if the company wishes to remain in business. Once the employee buyout offer has been accepted, the company should then be able to move on.
Ford will not be able to turn the company around in the next 6 months, but a year from now; we will be looking at a different company. Ford will be a much more efficient with its finance in order. However, if one waits for that day before taking positions of Ford, the stock would be much higher than its current level. In my view, at $8 / share, Ford is a good long term buy. Don’t bet the farm on this stock, but it is highly possible this stock could double in 12 months. Again, look at GM’s performance.
