Both Ford (NYSE:F) and General Motors (NYSE:GM) have always been near the top on the Fortune 500 list released each year – GM even placing No. 1 previously. After the Great Recession and ensuing downward spiral of the U.S. automotive markets, GM dropped to No. 15 in 2010, and was the only one in the top 15 not to produce a profit (the Fortune 500 list only takes into account top-line revenue). This year both carmakers slid again: What is the main reason why and why might it not be long before they both jump up in the rankings?
Remain in the top 10
GM dropped from fifth in the list last year, to seventh this year while its crosstown rival Ford slid from ninth to 10th. The main reason is easy to guess: Europe. Sales in Europe are running near 20-year lows and aren't looking to improve anytime soon. The situation a perfect storm of Europe's debt crisis, overcapacity with no demand, and sinking consumer confidence. Right now the factories are capable of producing roughly 17 million vehicles per year in Europe, and this year's sales pace is on track for roughly 12 million.
While the list doesn't account for profit, which is a good thing for GM and Ford, both expect to lose around $2 billion each this year. If either company is going to jump up in the listing next year, it's going to be done by growing top-line revenues here and in China.
Ford's off to a great start for the first four months of this year. Its car and utility segments are up 12.5% and 18.1%, respectively, versus last year. Those numbers are led by its popular Fusion and Escape models. America's best-selling truck, the F-Series, has seen its sales increase 19.1% this year so far. Across the board, its entire brand sales are up 12.7%.
Things are still heating up as last month was Ford's best April since 2007. Ford is also trying to grow its revenues in China as quickly as possible, planning to introduce 15 new models into the region by 2015.
As a company, GM has increased its sales in the U.S. this year by almost 10%. It's also launching a new design of its best-selling truck, the Silverado, this summer. It's hoping to grow revenues quickly with its 2014 model before Ford's next generation can hit the market next year.
GM is also bringing back two midsize truck models in a segment that Ford has entirely walked away from. In addition to the factors that are figured to increase revenue, it plans to undergo its largest portfolio refresh in company history. GM plans to shake things up with 90% of its models being replaced, redesigned, or refreshed by 2016 – a strategy that could significantly improve sales numbers.
This year both Ford and GM slid in the rankings, yet still remained juggernauts in the top 10. I think it's very likely with the automotive market rebounding in the U.S., and China expanding rapidly, that both will jump up in the rankings in the years ahead.
This will be especially true if Ford has continued success with its new models and GM can lure back lost consumers with its fresh portfolio of vehicles. Both companies trade at seemingly attractive stock price valuations and still represent two of the Fortune 500's strongest companies.