Ford (F 0.69%) has a leg up on its rivals in a very significant way: Much of the general public loves the Blue Oval for avoiding a government bailout, unlike General Motors (GM 1.20%) and Chrysler. While the advantage of that will decline as time goes on, Ford has enjoyed increased brand loyalty. Ford's company turnaround led by CEO Alan Mulally will be discussed in business schools throughout our nation in the years ahead. Finally the market has noticed what most analysts have been screaming about for a couple years, that Ford is a good investment! After hitting a 52-week low around $8.82 it's rocketed upward, recently topping $15. There's a lot to love about owning Ford stock for the long term.
Management
It's only appropriate that after discussing the company's turnaround that management is the first thing to love about Ford stock. Consider that between 2006 and 2008 Ford lost a staggering $30 billion, and yet was able to turn a profit in 2009 – only months after its crosstown rivals were bailed out. I expect management to make the same decisions and essentially export the success of the turnaround model to Europe, which is a massive overhang on the stock today.
Mulally is unfortunately nearing retirement, and it will be a sad day when we have to bid him farewell. Ford and its investors will still have him at the wheel through 2014, and we can sleep at night knowing that the Ford company, Ford family, and Ford shareholders all have aligned interests and should continue to be successful with Mulally's successor.
Super segment
Japanese rivals Toyota and Honda have long dominated what Ford has named the "super segment". It's a combination of subcompact, compact, midsize sedan, and small utility retail segments. Below you can see the four vehicles Ford has positioned in those segments, from left to right are the Escape, Fusion, Focus, and Fiesta.
Image courtesy of Ford
In 2004 the super segment accounted for roughly 35% of new vehicle sales, but has since climbed to represent over half of new vehicle sales – as consumers continue to downsize from larger vehicles. According to Ford, its share has grown faster than all other automakers in this segment, and it expects the super segment to continue its growth.
It's increase in market share is led by the Fusion and Escape, which both have an opportunity to break 300,000 in unit sales for 2013. That's a feat only Ford's F-Series has accomplished in nearly a decade. Ford's sales have been off the charts this year, and will only improve as it continues to refresh and introduce models into surging vehicle segments.
Lean and mean
While the Fusion and Escape lead the charge here in the U.S., the Focus and Fiesta are selling just as well overseas. The Focus is challenging for this year's No. 1 selling vehicle globally and continues to drive off the lots at high speed in China – the world's largest and fastest growing automotive market. Not to be outdone, the Fiesta is taking on the important task of attracting Ford's future bloodline – a younger, millennial-generation consumer – and it has been successful thus far.
In the first quarter of 2013, Ford reported much higher pre-tax profits than rival GM. That's an impressive feat because It did this on less revenue as GM sells millions more vehicles than Ford globally. The main reason for this victory is, of course, due to Mulally's "One Ford" vision. All four of those vehicles in the super segment are produced very efficiently on global platforms. That's helped lead Ford's North America operations to 11% margins – compared to 6.2% at GM. It will also be the reason that Ford will become more profitable faster in China.
Bottom line
Ford has a ton of momentum and there are many more than three reasons to love Ford stock – but these three represent much more in the big picture. Ford's management is the best in the industry, and I have no doubt Mulally is grooming his successor for a seamless transition. Meanwhile, Ford's strategy to focus on the future-trending segments will payoff compared to the years when Detroit refused to admit that gas-guzzling SUV's wouldn't sell forever. Ultimately Ford is a much leaner company, and with its global consolidation of platforms and operations, we can expect strong profits to continue.
Ford's first quarter in 2013 was a great one, and I believe the rest of 2013 is going to be full of good news and high sales numbers. As I'm typing this I received an alert that Ford has again topped its 52-week high and is sitting above $15.50 – I'm glad the market is finally giving Ford the respect its earned.
