Friday
Jul142006
Ford Motor Company: Protect My Investment and Build Hybrids
July 14, 2006 at 1:34 PM
Ford Motor Company is cutting back on production and trying to figure out how to save its business. Moody's cuts Ford's (F) bond rating, and the company prudently cuts its dividend. Much as General Motors (GM) has been, I think Ford will be the new focus of credit fears and bond holder worries.
The global car business is not in trouble, other companies are doing well. Why are Ford and GM in so much trouble? Is it just the Unions and health care? Well, that's part of it. Their competitors are all in countries where there is national health care; the expense is not borne by business (when it is) as in the U.S. These companies also lack innovation and risk taking. GM kills the electric car; and Ford cuts back on it's hybrid production. At least Chrysler had the wherewithal to go out and sell itself to a foreign company. I think they did it to find better management and bigger risk takers. (Germany is not a country known for being full of risk takers.)
As a shareholder/bond holder I wish Ford would make a bigger commitment to making more hybrids. By sticking to a failing strategy of big gas guzzling vehicles they are potentially ruining the value of my stock.
photo courtesy of Judith Zissman
Socially responsible investing: If you must own Ford common (F), be sure to vote your proxy. There are usually several shareholder proposals every year to get this company to clean up its act.
Disclosure:
I own FORD MOTOR CAP TR II (F-PS). This is a non-voting convertible preferred stock that pays a fat dividend of 6.5% (against a $50 notional that's almost 13%) . It's a risky bet but I prefer it to owning the common. I think many of the Ford descendants own this instrument as well. I believe that will make it harder for the company to cut the preferred dividend.
I also own put spreads* on Ford Common. This partially gives me a hedge against some of the credit default risk embedded in the preferred shares because I benefit from a drop in the price of Ford stock.
*The put spread? January 2008 expiration: 7.5 strike (long) 5.00 strike (short).
I own DaimlerChrysler Euro Notes maturing in 2011.
Nothing in this blog is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security.
The global car business is not in trouble, other companies are doing well. Why are Ford and GM in so much trouble? Is it just the Unions and health care? Well, that's part of it. Their competitors are all in countries where there is national health care; the expense is not borne by business (when it is) as in the U.S. These companies also lack innovation and risk taking. GM kills the electric car; and Ford cuts back on it's hybrid production. At least Chrysler had the wherewithal to go out and sell itself to a foreign company. I think they did it to find better management and bigger risk takers. (Germany is not a country known for being full of risk takers.)
As a shareholder/bond holder I wish Ford would make a bigger commitment to making more hybrids. By sticking to a failing strategy of big gas guzzling vehicles they are potentially ruining the value of my stock.
photo courtesy of Judith Zissman
Socially responsible investing: If you must own Ford common (F), be sure to vote your proxy. There are usually several shareholder proposals every year to get this company to clean up its act.
Disclosure:
I own FORD MOTOR CAP TR II (F-PS). This is a non-voting convertible preferred stock that pays a fat dividend of 6.5% (against a $50 notional that's almost 13%) . It's a risky bet but I prefer it to owning the common. I think many of the Ford descendants own this instrument as well. I believe that will make it harder for the company to cut the preferred dividend.
I also own put spreads* on Ford Common. This partially gives me a hedge against some of the credit default risk embedded in the preferred shares because I benefit from a drop in the price of Ford stock.
*The put spread? January 2008 expiration: 7.5 strike (long) 5.00 strike (short).
I own DaimlerChrysler Euro Notes maturing in 2011.
Nothing in this blog is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security.
Reader Comments