The Ford Motor Company (NYSE: F) is a large cap US stock that appears on my stock market investing watch list and has for some time.
The 113 year old Detroit automaker’s recent woes have been well documented and can be traced to their bail out by the US government in 2009 to the tune of $5.9 billion which was to be paid off by June 15 2022.
Except it was not a bailout.
It was simply a low-cost loan that Ford badly needed to develop hybrids and to update it’s factories to produce smaller cleaner vehicles.
At the time other sources of financing were difficult to come by for automakers and their suppliers and the loan allowed it to survive an industry crisis.
Picking up on what Peter Schiff commented on in his latest podcast in regards to the auto industry: used car prices in the United States are falling even though wages are going up and so are the costs of raw materials.
If you’re not already listening to Peter’s podcast and you’re serious about stock market investing and learning about the global economy the click the image to check out his podcasts:
Schiff mentions that lately US consumers have been leasing cars at record numbers even though it’s actually cheaper in the long run to purchase a car rather than lease one.
Consumers are opting for leasing cars because the monthly repayments are lower than the repayments on an auto loan.
But at the same time demand for used cars is waning due to the squeeze on consumer spending in the same way US retail sales are being affected so its good news for you if you are in the market to buy a used car.
But the bad news is that used car companies cannot sell cars at the end of their leases at the value they thought they could which means it will push up the cost of leasing a car.
Essentially fewer people will actually be buying cars which will lead to the auto market imploding but it is also an indication of the fragility of the US economy in so far as it’s slowing down when you factor in retail sales.
What The Ford Motor Company Says About The Auto Industry
I’m a big fan of large cap stock market investing.
For one following and reading the public announcements of large-caps can tell you an awful lot about not only the economics of the business but also the economics of the industry within which it operates.
We do think there will be people who fallout and they won’t be able to afford a new vehicle,”
Ford Chief Financial Officer Bob Shanks
The broader industry outlook according to Ford is that car sales in the world’s two largest markets have peaked after a multi-year set of record profits and sales for the U.S. auto industry.
In fact Ford estimates volumes will fall in the U.S. and China in 2017 and again in 2018.
The company forecasts leaner results for the first quarter and the expectation is for adjusted pretax profit to be in the region of $9 billion in 2017, down from $10.4 billion in 2016.
Even though Ford has a massive investment programme in place it expects the bottom line to improve in 2018 at the earliest.
This week Donald Trump tweeted his approval of Ford’s latest investment: $350 million in a data centre and re-tooling of a plant to transition from producing small cars to SUV’s and pick ups.
Big announcement by Ford today. Major investment to be made in three Michigan plants. Car companies coming back to U.S. JOBS! JOBS! JOBS!
— Donald J. Trump (@realDonaldTrump) 28 March 2017
Is Ford A Worthy Stock Market Investment?
Ford has at least been honest about their expectations for the future financial performance of the business and I like how Peter’s podcast puts into perspective for investors how its a reflection of what’s happening in the auto industry and consumer spending.
Right now from a stock market investing point of view Ford is on my watch list and there it shall remain until it drops to around the $7.50 level where I would be interested enough to take a position – all else being equal.