F- $2
A Better Idea
New York, BizBlog100@blogspot.com The tasks confronting Ford management are awesome. Their current product mix is overwhelmingly heavy vehicles and they are fully exposed to consumer retrenchment. Current unit volumes are so low that it is difficult to absorb engineering and tooling costs. But I don’t think their survival is at issue.
I have seen F successfully restructure and resuscitate. In the 1980’s, the Company turned Europe from loss to big profit. The same happened domestically in the 1990’s, powered by Ford’s leadership position in SUV and light truck.
I don’t know the product equation that will drive the next cycle; I’m skeptical that Fiesta imports can be a meaningful profit contributor. But I am confident there will be a recovery in volumes --- perhaps even with big cars Americans have always loved!
But the upside is the real prospect of a GM bankruptcy! The opportunity is in light truck market share. F & GM each have about 20% share, Chrysler has about 10%. It is critical to their domestic profitability. I think the prototypical truck buyer will have several reasons to favor F over a “re-structured” GM. I foresee a meaningful shift in market share in the most attractive segment of the auto market (by profit contribution). Each 1% shift in light truck market share represents $1-2 billion in annual sales.
To date, Ford is taking the high road in public comment. But they have clearly differentiated their business strategy from their bailout-seeking competitors. I suspect the dialogue will sharpen considerably as GM’s fortunes become hostage to bureaucracy. And I think it will make a difference.
Disclosure: I drive an Explorer, my second; preceded by a beloved T-Bird.
BizProf100
Wednesday, February 25, 2009
Goodyear Down 36%
GT- $5
The Wrath of Sol?
New York, BizBlog100@blogspot.com The prospect of an extended production lull, disappointing earnings and a continuing credit watch have caused a 2-month, 36% decline in GT. Imminent bankruptcy at #1 customer GM and the general condition of automotive life in mid-America are other factors.
These fundamentals are reinforced by the reduction in GT investment rating by Sol Ludwig, tire industry sage at Key Bank Investments (and other places before). I don’t know Sol’s reasoning but the foregoing are reasonable explanations, perhaps accentuated by general market conditions.
I remain a GT stockholder because I have seen tire stocks come off the cycle bottom to significant earnings and strategic appeal. Goodyear is a primo name and will prosper, albeit later.
The small reductions in domestic tire capacity in no way offset the overall decline in volume and increased offshore capacity. But, from current levels, industry volume will either get better --- or get a little worse and then get better. The stocks move on production!
A weaker dollar will help, since a majority of GT sales are abroad and a weaker dollar will challenge import pricing. But maybe the greatest benefit of the weaker dollar will be the Semi-Sovereign wealth funds accumulating in Asia. These and related entities are investing extensively in (China, Thailand, Indonesia, Malaysia) in tire capacity. It is inconceivable to me that they will not invest the incremental $2-$3 billion necessary to acquire a brand of Goodyear stature.
Back to Sol. I am not a current client so I have not seen his recent work but I recall earlier opinion changes and the only sure thing we know is that his outlook will brighten within a few months.
BizProf100
The Wrath of Sol?
New York, BizBlog100@blogspot.com The prospect of an extended production lull, disappointing earnings and a continuing credit watch have caused a 2-month, 36% decline in GT. Imminent bankruptcy at #1 customer GM and the general condition of automotive life in mid-America are other factors.
These fundamentals are reinforced by the reduction in GT investment rating by Sol Ludwig, tire industry sage at Key Bank Investments (and other places before). I don’t know Sol’s reasoning but the foregoing are reasonable explanations, perhaps accentuated by general market conditions.
I remain a GT stockholder because I have seen tire stocks come off the cycle bottom to significant earnings and strategic appeal. Goodyear is a primo name and will prosper, albeit later.
The small reductions in domestic tire capacity in no way offset the overall decline in volume and increased offshore capacity. But, from current levels, industry volume will either get better --- or get a little worse and then get better. The stocks move on production!
A weaker dollar will help, since a majority of GT sales are abroad and a weaker dollar will challenge import pricing. But maybe the greatest benefit of the weaker dollar will be the Semi-Sovereign wealth funds accumulating in Asia. These and related entities are investing extensively in (China, Thailand, Indonesia, Malaysia) in tire capacity. It is inconceivable to me that they will not invest the incremental $2-$3 billion necessary to acquire a brand of Goodyear stature.
Back to Sol. I am not a current client so I have not seen his recent work but I recall earlier opinion changes and the only sure thing we know is that his outlook will brighten within a few months.
BizProf100
Subscribe to:
Comments (Atom)
