The financial crisis nearly brought the American automotive industry, including Ford (NYSE:F) and General Motors (NYSE:GM), to its knees. Years later, enormous progress has been made. Ford and GM are back to reporting growth, proving once again that American carmakers can compete globally.
GM and Ford are seeing strong sales momentum as the new year begins. Ford in particular looks to have a fantastic year ahead of it. This is due in part to its recently announced strategic initiatives involving its flagship F-150. Those measures, in addition to its strong growth in recent quarters, mean that investors are set up very well for the coming year.
Ford makes a major change
Ford announced a huge shift in its F-150 line of pickup trucks, which is its main profit engine. The new line of 2015 F-150s will feature an "Eco-Boost" engine and a new aluminum body, both of which are designed to result in greater fuel efficiency. Ford hasn't revealed new gas mileage information, but analyst expectations are pegged at 26 or 27 miles per gallon. If accurate, that would represent a 15%-20% increase in fuel efficiency from the existing model.
Meanwhile, General Motors can't seem to get out of its own way. After having to be bailed out during the heart of the recession, GM was given new life from its 2010 public offering. It's back to reporting growth again: GM's third-quarter sales rose nearly 4% versus the prior year. The company also grew adjusted earnings before interest and taxes by 13%.
The 2014 Chevrolet Silverado is also in the running for the North American truck of the year. With all this in mind, it seems natural for GM to have a strong 2014 ahead as well. However, GM just announced that it is recalling 370,000 full-size 2014 Chevy Silverados due to a potential fire hazard.
This only complicates General Motors' progress in its quest to compete with Ford in the realm of pickup trucks. The Chevrolet Silverado is the second-best-selling pickup in the nation, but it just can't reach the F-150's heights. Ford's 150 is simply the king of pickups; it has had the honor of being America's top-selling pickup truck for an amazing 37 years in a row.
Ford's shareholders are in a great spot
Not only does Ford already dominate the market for pickup trucks in the United States, but it's once again competing across the world. Ford's third-quarter report showed that its three international markets posted a combined profit. The third quarter was the first time that this has happened in more than two years.
In all, revenue grew 12% in the quarter. This is far better than General Motors' sales in the same quarter. Ford very recently increased its dividend by 25%, and provides a 3% yield. That stands well above the yield on the broader market. After suspending its dividend in 2006, Ford resumed its payout in 2012 and has increased it twice since then. To its credit, GM also just announced a dividend; like Ford, GM's dividend yields 3%.
The Foolish conclusion
While the financial carnage caused by the 2008-2009 recession brought the U.S. auto industry to the brink of collapse, those days are well in the rearview mirror. Both Ford and General Motors are returning to sales growth. At the same time, there's a clear winner among the major U.S. auto makers.
Ford's F-150 is the best-selling vehicle in the country, and its new initiatives designed to generate greater fuel efficiency will only improve its standing in the near future. Ford simply dominates the pickup truck market, and its international operations are back on track.
As a result, it's not at all surprising to see that Ford sharing its new-found success with shareholders. The future is bright for both Ford and its investors.