Amidst Toyota (TM) recalls and continuing struggles of General Motors, Ford (F) has surged and closed at $12.69 on Wednesday. The motor company is up 3.8% this month alone and is showing no signs of slowing. Many project that the stock price will not continue to escalate in coming weeks, but I would hold off on selling for now. With a P/E ratio remarkably low compared to its peers, adding shares to your portfolio may not be a bad idea.
Emergence of an Industry Leader
On the whole, I think we are experiencing Ford’s takeover of the domestic auto market. With a 43% increase in sales in February, compared to GM’s underachieving 12% gain, Ford is poised to solidify itself as the top automaker in the United States. Toyota was dealt a huge blow upon global recalls and GM’s shutdown of four subdivisions (Saab, Hummer, Saturn, and Pontiac) showed up in recent earnings reports. The timing of these occurrences is key; a recovering economy provides the platform for industry development and restructuring, and thus far, Ford has led the way.
Unprecedented Trends
Ford has not seen such dominance since the 1930s—a time when it was the preeminent producer of automobiles and made history with its innovation. While the 2010 sales race is far from over, both consumer and investor confidence in Ford will certainly provide a boost in outperforming its competitors. Without the pressure that GM is facing as a result of bankruptcy, Ford has emerged with new product lines and a superior business model for which a restructuring company like GM is no match. With the economy still fragile and buyers beginning to retest the waters, reliability and consumer sensitivity is vital to the success of the auto industry. Toyota and GM have proved far less than reliable in recent months, giving Ford yet another edge in a reemerging market.
Product Management and Going Forward
In predicting what will occur in the industry in the coming year, investors should track the internal changes at each company. Ford CEO Alan Mulally has put together a sales and development team that, judging by recent months, surely knows how to manage the recovering face of the auto industry. Mulally has weathered the financial storm far better than GM CEO Ed Whitacre. This is evident in the companies’ staffing. Ford has stuck with the majority of its sales team and, in turn, has been able to move forward under current conditions. On the other hand, Whitacre has struggled to find the formula for sales success. His staff has been revamped twice in the past three months. In recovering economies and industries, it benefits investors to look for both stability and frontrunners. Ford has powered out to an early and substantial lead in 2010 and seems to be in a position to hold on.
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