Is Ford the one that will pull through?

[disneysteve]

Watching all the news about the big 3 auto makers going to DC again to beg for money, it seems that every report mentions how Ford is the only one in decent shape and really doesn't need a bailout. I bought Ford a while back at $5 and change only to sell it for $2 and change. It continued to fall well under $2 but is now back up in the $2.80s. If they are the solvent ones of the 3, I'm wondering if getting back in at this level might be a good long term play.

Ignore my big picture or asset allocation and assume I'd be doing this with "play" money that doesn't impact my overall portfolio.

[maat55]

I would want to see if they are competitive with foreign companies as far as expenses. Everyone is having to endure low sales, I wonder what they're labor costs are in comparison to the others. They could be better off, but not good enough.

I like your chances better at the Casino.

[srblanco7]

Read an article today which indicated that Ford won't return to profitability until 2011. Haven't studied the numbers to see what the "book value" of the company is and how that compares to the share price and number of outstanding shares, but 2+ years w/o profit, would seem to be a red flag to investing at this point.

The article also mentioned that the Big 3 have postponed payments (during the current cash crunch) to a "trust fund" established by UAW to allow the Big 3 to free themselves from future retiree health care obligations. I assume the future resumption of these payments are accounted for in the profitability projection, but it wasn't definitively stated.

That being said, I could foresee a bump to the share price based on some "as yet to be defined" plan by the Feds to assist the Big 3 w/ avoiding bankruptcy. So if you were willing to invest to take advantage of the bump, there might be an opportunity to make a few dollars, but there are definitely still risks.

That being said, based on the recent performance of my portfolio, you'd likely be better off if you do the exact opposite of what I think...

[Broken Arrow]

My oh my. What an interesting question. So many factors....

It'd probably be easiest to start with what MorningStar and S&P have to say about this. S&P currently has a Hold rating, and here's an interesting quote from their analyst report:

However, we are less confident in (Mulally) or Ford's ability to consistently bring to market successful vehicles -- one of the company's most important challenges, in our view.

Talk about getting straight to the point. I've argued in the past for support for Ford because of their fuel-efficient vehicle know-how. However, would that still be enough to compete against Japanese automakers and somehow become profitable?

What information S&P had in their report was glum, but MorningStar was even worse! Their fair value estimate is $0.50 per share(!) with the recommendation to buy at $0.20 per share and selling at $1.30. This is based on their latest update today (Dec 3).

Citing essentially the same concerns as the S&P report, but I found this to be the alarming statement, "Government aid will all but wipe out stockholders."

Huh. I thought it was just a loan, not a bailout? Then again, AIG's assistance was a loan, and shares dropped hard on that one.

Talking heads on TV are sharing the same glum outlook, basically saying that buying Ford now would not be based on any company fundamentals or intrinsic value. At this point, the price is floating on pure speculation.

So, ok, let's talk speculation. About the only play I see right now is to bet that Congress will indeed hand out a loan to Ford. While no two trades are exactly alike, from what I've seen so far of government involvement in relation to stock prices, there's generally a large volume of support leading right up to the announcement of the assistance, and then, poof. Huge drop as every speculator with half a brain cashes out and runs off with the money before the stock falls any further. Some will even sell minutes before that, content with the locked in gains, regardless of the decision.

But that's also assuming that Congress agrees to a loan. If they say No, you'll know quickly as support immediately dies and the stock shrivels up on the spot.

Industry and sector-wise, they're all under a tremendous amount of selling pressure, I wouldn't hold out for any relief support by proxy.

Market-wise, I'm seeing a lot of strange support lately. When the market shoots up in light of bad news, something is up. Sure, it's entirely possible that I could have missed something, but when you check with others that are far more experienced and knowledgeable than yourself, and they're not sure either, well, it makes me paranoid.

Personally, while I do support giving Ford a chance, I wouldn't play this stock. But that's just me. But if I were to play this stock, I'd find a nice big dip somewhere, get in on it, watch it like a hawk, and get out fast. And I do mean fast. Also, I most definitely would not trade this beyond the moment the news hits the airwaves about Congress' decision on this matter, good or bad.

As always, that's just my personal opinion. Please take it for what it's worth.

[disneysteve]

I like your chances better at the Casino.

Me, too.
I'm trying to talk my wife into going Saturday night. I've won on 5 of our last 6 casino trips. I'm up $606.50 total for those visits. Sure beats my portfolio performance.

BA - Thanks for talking some common sense into my head. I'll save my money for blackjack.

[Christophercarl]

I think the labor unions are either going to have to disappear in the this industry or drastically lower their demands if any of these manufacturers is going to be able to compete in the long-run. Foreign cars are being made better every day at a fraction of the cost of an American made car. The wages of the workers in the U.S. is the main reason for these higher prices, and in order to pay workers while still make a profit these companies are going to be charging prices that most consumers will not be willing to pay when there are so many quality substitutes out there. I think the Volt will either make or break GM. I'm sure the demand will be there for it, but I don't know if they will be able to keep up with production and the distribution needs.

[Broken Arrow]

BA - Thanks for talking some common sense into my head. I'll save my money for blackjack.

Hey, I'm not going to lie. I speculate on stocks too. Good or bad, I'm still doing it. Just not with any of the automakers right now....

While I don't personally think Ford is a good bet right now, others with a different perspective may feel otherwise and there is nothing wrong with that either.

We all know and accept that we're speculating here, so, just whatever floats your boat.

[disneysteve]

Hey, I'm not going to lie. I speculate on stocks too. Good or bad, I'm still doing it. Just not with any of the automakers right now....

While I don't personally think Ford is a good bet right now, others with a different perspective may feel otherwise and there is nothing wrong with that either.

We all know and accept that we're speculating here, so, just whatever floats your boat.

Agreed. I guess that's why they call it speculating and not investing.

I may still take a leap and buy some. Let's see what happens in Congress today.

[maat55]

Me, too.
I'm trying to talk my wife into going Saturday night. I've won on 5 of our last 6 casino trips. I'm up $606.50 total for those visits. Sure beats my portfolio performance.

BA - Thanks for talking some common sense into my head. I'll save my money for blackjack.

Don't tell me your one of those that thinks he is ahead of the game. Casino players helped pay for my daughters college, thanks.

[disneysteve]

Don't tell me your one of those that thinks he is ahead of the game. Casino players helped pay for my daughters college, thanks.

Not at all. I know the odds, better than most players probably. I am also perfectly happy to get up and walk away if I find myself ahead, even if I've only been there for 15 or 20 minutes. And I always have both a loss limit and a win limit when I go. Many people set a loss limit but they neglect to set a win limit, so if they are doing well, they don't know when to stop and usually end up playing until they lose.

I know the house has the edge. We just happen to enjoy playing. We don't spend much on other forms of entertainment. I haven't been to a movie for a year. I rarely drink, don't smoke, don't have any expensive hobbies, etc. This is our entertainment every month or so.

What did your daughter do?

[maat55]

My daughters are 1/4 Creek Indian. They recieved grants partially funded by Creek Casinos here in Oklahoma.

Both got degrees in Parent educators and child developement.

[MoneyTrev]

A friend of mine and I were talking about this recently.

Here's what we have concluded:

"the American auto industry - too many players and poor management, the market should take its toll."

[segmond]

I think Chrysler may pull out first, but Ford probably has better prospect long term.

[bbm]

Ford looks better than the others in my opinion. Their currently CEO was hired from his Boeing, and replaced a member of the Ford family. William Ford still sits on the board of directors, and Mulally was able to talk the reluctant Ford family into selling the Jaguar and Land Rover brands. That was a good move in my opinion. He did it early in the year. Mulally has only been there since 2006, so I'm sure he is still making a transition from planes to automobiles, but he seems to have more common sense than GM executives. He also brought back the Taurus. The book value I'm calculating is currently at -0.84 a share, but other sources are showing $2.56 book value per share. It will be a pure speculative move. Better than GM which I'm estimating at $-98.19 book value per share, but other sources are reporting $-65.53.

[kork13]

If you look at most of the news reports, most of them focus on GM as being in the most trouble. When Ford told Congress its $7B (-ish? i forget exactly) request would probably not be needed, but was more there as a backup, it immediately became the one with the most hope of pulling through--therefore, the media has begun to ignore Ford. It seems that some are also envisioning an eventual merger of Chrysler/GM, which puts GM on the spot as the centerpiece of the troubled auto industry.

**Disclaimer: Don't take this as gospel, it's simply my observations based on what I've seen/read/heard in the news and elsewhere. I honestly haven't been tracking this very carefully.