Ford stock hits a 4-year high.
Ford Motor Co. shares closed the day on Wall Street at $9.90, a comfortable 2.4%, or 23-cent jump for the day, well above the Dow Jones Industrial Average.
But more significantly, the bell rang as Ford shares surged to their highest level in four years, and a big turnaround from the spring of 2009, when the automaker was trading just north of a dollar.
Industry analysts, such as Joe Phillippi, of AutoTrends Consulting, point to a variety of reasons for the surge. As 2009 began, the automaker decided to forego the federal bailout needed by its cross-town rivals, General Motors and Chrysler, and was later able to avoid going into bankruptcy like the other members of Detroit’s Big Three. That, said Phillippi, has not been missed by consumers who see it as a sign of strength – which translates into an endorsement of Ford products.
The automaker has been receiving quite a few of those. Two of its models are up for the coveted North American Car and Truck of the Year awards, which are handed out at the North American International Auto Show, next month. The influential Consumer Reports magazine described Ford as the only Detroit maker producing “world-class” products, when it released its annual vehicle reliability survey several months ago.
Meanwhile, a new study by Zacks Investment Research finds that Ford is tops for projected vehicle residual values among makers based in the U.S. The report says the residuals on a Ford vehicle after 36 months in service have gone up an average $1,310 for 2010 compared to past model-year. That can yield significant savings not only to consumers but to Ford itself, especially when it comes to leasing.
Ford CEO Alan Mulally last week hinted at a possible surge in sales during the last two weeks of the year, and Deutsche Bank analyst Rod Lache is predicting Ford will see a 4.5% jump in sales when the books are closed for December. That would be a bit behind the overall 7.5% jump he predicts for the U.S. market, but by comparison Lache foresees double-digit declines for GM and Chrysler. Lache is predicting Ford will end the year with a 15.5% market share, up a half point from 2008.
That could put Ford on the path it needs to achieve its promised turnaround, which would bring it back to profitability in 2011. The automaker reported a third-quarter profit of $1 billion, but the numbers are likely to be weaker for the October-December quarter.
While there’s plenty of good news, Ford still has a significant number of challenges ahead of it. Though it avoided bankruptcy, the maker wasn’t able to walk away from billions of dollars in debt, like GM and Chrysler. It has been taking steps to reduce its liabilities, however, through such moves as debt-for-equity swaps.
And Ford’s relatively strong position has, in at least one way, backfired on the company, convincing workers they didn’t need to approve a requested package of concessions, which went down to overwhelming defeat last month.
Mulally said last week he sees other opportunities to reduce costs and the automaker outlined one such way on Tuesday, announcing a buyout package it will offer to all 41,000 U.S. employees. The deal could yield up to $70,000 for those who agree to leave the company.
How much higher Ford shares will go is uncertain, though the company has shown surprising momentum in recent weeks and very well could top the $10 mark by year’s end. That’s a long way from the company’s 52-week bottom, when shares fell to just $1.50. On the other hand, Ford was trading at $15, as recently as 5 years ago, and it hit an all time peak a decade ago, at more than $37 a share.
Few expect it to reach that number again any time soon.