Q. I’ve owned Ford Motor Co. shares for about 10 years. I should have sold five years ago. Now that they’re down a lot, should I keep them or sell and take a loss?
R.E., via the Internet
A. Its new corporate theme, “The Way Forward,” accelerates a restructuring strategy of plant closings, up to 30,000 job cuts and repositioning its brands.
On the plus side, it has less debt and more hybrid vehicles than rival General Motors Corp. It is run by a Ford–William Clay Ford Jr.–whose family has a roughly 40 percent voting share of the firm. That means average shareholders can be confident cash dividends will continue.
It will receive $5.6 billion in cash from the sale to an investor group of its prized Hertz Corp., the world’s largest car rental business. It obtained an agreement from the United Auto Workers union requiring active hourly employees and retirees to pay more for health care. The deal is expected to save Ford $850 million annually in health-care costs.
More Top Picks Best Kids Bikes
Its Mustang and F-Series pickup have boosted sales, and Ford hopes the Fusion sedan and other new models will too. The resurgence of Chrysler Group proves a few hot models can improve a company’s fortunes.
Shares of Ford (F) are up 2 percent this year, following declines of 47 percent last year and 8 percent in 2004.
Although it is expected to earn about $1 a share in profits excluding special items when it announces 2005 earnings on Monday, a major negative is that Ford’s U.S. market share of about 18 percent was down a full percentage point from 2004. Some new models such as the Five Hundred sedan and Freestyle SUV/wagon have disappointed, and subsidiaries such as Jaguar are a financial drain.
Chevrolet also surpassed Ford as the No. 1 selling brand in the U.S., its first win since 1986.
The bonds of Ford and its Ford Motor Credit unit have been downgraded to junk status. Ford’s goal of $7 billion in pretax profits by 2006 was abandoned and no market share target is being given. Some fear bankruptcy is a risk if restructuring efforts fail.
“The Ford downgrade incorporates the view that the company’s financial and competitive position will remain under considerable stress through 2007 despite the benefits that may result from its pending restructuring initiatives,” Moody’s Investors Service said in a statement.
Consensus Wall Street recommendation on Ford is a weak “hold,” according to Thomson Financial. That consists of two “strong buys,” nine “holds,” three “sells” and four “strong sells.” Earnings are expected to decline 31 percent in 2006, compared to a 37 percent gain expected for the major auto manufacturers. The projected five-year annualized growth rate of 7.5 percent is in line with its peers.
Although Ford said GM’s recent move to cut prices and reduce incentives is better for the industry, it doesn’t plan to immediately match that step. Chairman Ford said the company won’t do anything “stupid” to gain market share.
———-
Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].