Richard Engdahl sits down with The Motley Fool's senior auto analyst John Rosevear to discuss the auto industry.
John got his start at the Fool with "Talk Me Out of Buying This Stock," a 2009 article about Ford (NYSE: F ) , and the stock is still high on his list of favorites. In this video segment, he explains what he likes about Ford's performance in North America, as well as its current strategies in Europe and China.
A full transcript follows the video.
Richard Engdahl: If you could own one car now, for free, what would it be?
John Rosevear: One car I would own right now for free probably won't be out for another year.
I drive a Cadillac CTS-V. This is their mid-sized sedan, basically with a Corvette drive train. This is the kind of car you can drive when you telecommute to work, as I do telecommute to the Fool. It's a great, for me, combination of -- it's very comfortable, it's very quiet, it's ridiculously fast. It's a surprisingly competent sports sedan, compared with a BMW or something else.
The new one is going to come out next year. They just released the regular CTS. It's an open secret that the third generation of this monster car, as it's been, will come out next year. I want one of those.
I fear that they're going to price it at around $90,000, though, so it may be a bit of a reach, but we'll see.
Richard: If you could choose one auto-related investment, just one, what would it be?
John: I still like Ford. I still like Ford a lot, and the reason I like Ford is the story is simple and good. They fixed North America.
Ford operates in four regions around the world: Europe, South America, North America, and then "the rest," which is, from a bottom-line perspective, China, basically, but Asia-Pacific-Africa they call it.
Ford has fixed North America. Their products are very strong, they've gained some market share, their margins are terrific here. They've been over 10%, which is just outstanding for a mass market automaker.
They are exporting that formula around the world now, that approach to business. They're reshaping Europe. They lost $1.7 billion in Europe last year. They expect to break even in a couple of years because restructuring is going on and so forth.
The market has been terrible, is the real problem, but they're doing all of the right work and this has a lot of credibility because they did it here. Right there, that's almost $2 billion on Ford's bottom line. They made $8 billion before taxes last year. That would be a big jump, just if they break even in Europe.
Likewise in Asia, it's the biggest Ford investment since, I think, the 1950s. They're spending almost $5 billion building factories and so forth in China. They're setting up factories in India as an export hub to start to go into Southeast Asia and so forth.
And Fords are being really well received in China. The Focus was one of China's best-selling cars last year. Their version of the Fusion, the new Fusion that has been such a hit here, called the Mondeo -- that's the European name for it, but it's the same car -- is also doing well. The Escape, under the European name the Kuga, is doing very well in China, too.
The product point that Ford has aimed at, to offer a mass market product that's a little bit premium -- the interior in something like a Focus is nicer than you think of as a compact car interior -- it's a little better done, and they price it a little higher, and they make a little more money.
That is working out very well in China, where there's this whole universe of consumers who want something that's nice but it's not ostentatious. A Ford kind of seems to fit that. Ford's current product approach seems to fit that quite well and they're doing quite well there.
And the fact that Ford has been around since 1901 plays really well in China. They like that sort of thing.
Richard: I bought Ford stock in 2012, I believe. It's done quite well for me. I think you said in your article you bought it in 2009. It's done even better for you.
John: I did. I did. Actually, I wrote an article in January of 2009 called "Talk Me Out of Buying This Stock," and that launched my career doing autos at the Fool, that article. It's my all-time favorite Fool article. First of all, because it was a great call, and that stock I was asking readers to talk me out of was, of course, Ford.
I was saying, "This looks like a buy to me. Tell me I'm crazy." I did buy it in March of that year, and it has done very well for me. But I also like it because it launched me in this direction.
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