Rough Days Ahead for Ford and the Big 3 in General?

[Johnnny5]

Ford, G.M and FCA are taking a beating today on Wallstreet. With Ford's stock down nearly 5% to $10 a share. It hasn't been this low since the middle of Great Recession! With the likelihood that the auto industry is on the downward trend from the record levels of the last few years, how might this affect Detroit? Will the plans for the Michigan Central Station be delayed or reconsidered if things get considerably worse?

Not to make a mountain out of what might just be a bump in the road, but considering the overall health of the economy profit warnings and massive restructuring plans seem a bit ominous heading into an era of rising interest rates and the possibly of increased tariffs.


https://www.msn.com/en-us/money/comp...cid=spartanntp

[Richard]

We impose a 2.5% tariff on imported cars but a 25% on vehicles that haul goods or trucks,our trucks are to big for little streets across the pond.

When you are selling a $80,000 truck and the imports are more reliable,fuel efficient at a cheaper price and your imposed tariffs are removed things change.

The are like Harley Davidson,pressure to impose import tariffs for thier benefit but then get mad when the situation is reversed on the other end.

Gm and Ford use an additive in the fuel,GM puts the fill tank under the hood,Ford puts it next to the fuel fill,lots of people mistakenly put the additive in the fuel tank which kills the fuel system.

They charge $12,000 for the fix or $18,000 for a new motor,the insurance companies pay the bill but everybody pays higher insurance rates because of it,I am all for buying American but when you blantley phuck your customers for profit the chickens come back to roost.

They are now like the old Jaguar days,expensive to buy new but once they start breaking down they are big bucks to fix,everybody that I know that has a new Ford truck seems to have a $3000 to $5000 bill in the service department,it becomes sketchy to buy used anymore for the Adverage person.

[JBMcB]

Gm and Ford use an additive in the fuel,GM puts the fill tank under the hood,Ford puts it next to the fuel fill,lots of people mistakenly put the additive in the fuel tank which kills the fuel system.

Are you talking about DEF? That's not a fuel additive, it's used to scrub exhaust. I'm sure people have made mistakes, but it's pretty friggin' obvious which fluid goes into which pipe - they are different sizes, different colors, and one says DIESEL and the other says DEF in big letters.

[Richard]

Are you talking about DEF? That's not a fuel additive, it's used to scrub exhaust. I'm sure people have made mistakes, but it's pretty friggin' obvious which fluid goes into which pipe - they are different sizes, different colors, and one says DIESEL and the other says DEF in big letters.

Well sense Ford actually sells the replacement parts in kit form it seems to be pretty common,granted it is obvious but things happen.

People with boats have a clearly marked gas fill but yet they mistake the rod holders and fill the bilge with fuel.

If you have one,call your insurance company and tell them that you mistakenly put the Def in the fuel tank,I bet they will know exactly what you are talking about,you would think that it would be hard to not remember to put the gas cap back,but yet it happens.

So why did GM put the tank under the hood where nobody could make the mistake,I guess they had the better idea there.

But any rate,they are good trucks,but expensive to buy and maintain verses the imports so it seems like they are repeating the 1980s all over again.

I think the train station aspect is a different division and not affected in the bigger picture.

[EastsideAl]

Facing declining interest in car ownership and a quickly declining birthrate, together with lower incomes, pressure to drastically decrease carbon emissions, and the technological changes that will eventually end driving, I would say that all car companies are potentially in trouble.

[Pat001]

Allan Mullaly saved Ford from their last crisis and then retired in 2014 with the company on a solid footing. Disappointing that only four years later Ford needs to spend billions restructuring again. Maybe rethink spending $100 million to re-hab an old train station?

[softailrider]

Facing declining interest in car ownership and a quickly declining birthrate, together with lower incomes, pressure to drastically decrease carbon emissions, and the technological changes that will eventually end driving, I would say that all car companies are potentially in trouble.

With all due respect, I think the “technology changes that eventually end driving” are a long, long way off.

[9606 Prest]

Ford shares fell 6% today to below $10 for the first time since 2012 and rival General Motors Co. continues to make new lows. With rising interest rates and tariffs, it doesn't look good!

[Lowell]

All three companies are making a ton of money. If their earnings and revenues are off from the past couple of years, as they are, those are off from record highs. In other words they are flying along at a nice clip and are equipped to flex easily to continue to stay profitable.

Ford is looking like a good buy at 10. It is paying 5.7% dividend. How does that compare to an under 2% CD with no liquidity? It's price to earnings PE ratio is under 6. The problem is that these stocks have no glitz like Tesla that pays zero dividend and is losing $3 a share per quarter.

[Bham1982]

I really hope my friends/acquantiances working at the Big 3 and suppliers are putting lots of money away.

I'm quite concerned that we're gonna have another downturn like 2009, and this time, the firms won't be bailed out. I see lots of seemingly foolish behavior, with people buying boats, jetskis, ATVs and other low-priority toys, doing six-figure home renovations, buying homes and cars they can barely afford, etc.

I have a neighbor [[works for a supplier) who drives a Porsche Cayenne yet he claims he doesn't have enough money to install blinds in his newly bought [[new construction) house [[which was mortgaged, and pricey). If he's serious, I guess I'll have a new neighbor come the next recession.

Memories are short. The good times will end, harshly, as it always happens with the Big 3. But this time I doubt Congress will bail them out.

[401don]

I really hope my friends/acquantiances working at the Big 3 and suppliers are putting lots of money away.

I'm quite concerned that we're gonna have another downturn like 2009, and this time, the firms won't be bailed out. I see lots of seemingly foolish behavior, with people buying boats, jetskis, ATVs and other low-priority toys, doing six-figure home renovations, buying homes and cars they can barely afford, etc.

I have a neighbor [[works for a supplier) who drives a Porsche Cayenne yet he claims he doesn't have enough money to install blinds in his newly bought [[new construction) house [[which was mortgaged, and pricey). If he's serious, I guess I'll have a new neighbor come the next recession.

Memories are short.The good times will end, harshly, as it always happens with the Big 3. But this time I doubt Congress will bail them out.

Ford & Chrysler are putting all their eggs in the SUV/crossover mkt. GM says it will continue to make cars and with Ford bowing out it should give them enough market share to make them profitable as long as Trump allows them to be imported from Mexico. Meanwhile average transaction prices are now around $40,000. Not a good combination.

[Cincinnati_Kid]

Economists have been predicting a downturn for the last 6 months. I don't think people are listening. These tariffs might just expedite things as well. The CEO of Lucerne International, a auto supplier in Auburn Hills, said layoffs are imminent due to these tariffs. I get what Trump is trying to impose, equal trade for everyone, but why torpedo the economy at this point to prove a point? Because that's what's going to happen.

[oladub]

Ford & Chrysler are putting all their eggs in the SUV/crossover mkt. .

How many times have we see the Big 3 stop making compact cars domestically because it was more profitable to make big cars? Every time a recession then hits or gas prices get expensive, a poll comes out showing Americans are buying more foreign cars because they are less expensive and get better gas milage. Then its bailout time. Repeat cycle.

[313WX]

Ford & Chrysler are putting all their eggs in the SUV/crossover mkt. GM says it will continue to make cars and with Ford bowing out it should give them enough market share to make them profitable as long as Trump allows them to be imported from Mexico. Meanwhile average transaction prices are now around $40,000. Not a good combination.

While GM hasn't exited the sedan segment, they're still screwed in a way because, unlike Ford and FCA, they have basically exited the world. If the US is hit hard with a recession, they have nowhere else to turn to except China.

[softailrider]

All three companies are making a ton of money. If their earnings and revenues are off from the past couple of years, as they are, those are off from record highs. In other words they are flying along at a nice clip and are equipped to flex easily to continue to stay profitable.

Ford is looking like a good buy at 10. It is paying 5.7% dividend. How does that compare to an under 2% CD with no liquidity? It's price to earnings PE ratio is under 6. The problem is that these stocks have no glitz like Tesla that pays zero dividend and is losing $3 a share per quarter.

I agree with all of the above, however a caveat may be in order. It’s still an investment in an industry that, due to our president in office and other factors, may be in more of a state of flux than usual. Who knows how this tariff stuff he’s coming up with is going to pan out? That 5.7 % dividend does sound appealing, and it would be a tempting thought to park money there, but be aware, this 10.00 dollar stock could go down to 5.00 again. I’m no CD fan [[ I’m a no load stock and bond mutual fund person ) but with a CD, as you are aware , your initial investment isn’t going anywhere.

[davewindsor]

...
Not to make a mountain out of what might just be a bump in the road, but considering the overall health of the economy profit warnings and massive restructuring plans seem a bit ominous heading into an era of rising interest rates and the possibly of increased tariffs.

I agree with you that the current administration's rising interest rates is not good news for the economy. The FED rate at 2% is too high and uncompetitive. Canada's recent increase in the central bank rate to 1.5% is also too high. Trudeau wants to increase trade with Europe and other nations because of increased US tariffs, yet GB's rate is 0.5%, Europe's rate is 0.0% and Japan's rate is -0.100%. How are we supposed to compete with those lower rates?

[Honky Tonk]

I agree with you that the current administration's rising interest rates is not good news for the economy. The FED rate at 2% is too high and uncompetitive. Canada's recent increase in the central bank rate to 1.5% is also too high. Trudeau wants to increase trade with Europe and other nations because of increased US tariffs, yet GB's rate is 0.5%, Europe's rate is 0.0% and Japan's rate is -0.100%. How are we supposed to compete with those lower rates?

Exactly. People wonder why all the shops are closing their doors. Level the playing field for everyone and let everyone have a fair chance @ making a living, not just the top 1%. End foreign government subsidies to their manufacturing sectors, or else start subsidizing ours.

[Pat001]

Ford is looking like a good buy at 10. It is paying 5.7% dividend. How does that compare to an under 2% CD with no liquidity?

Ford currently pays a 15 cent per share quarterly dividend. The only reason that looks like a good investment is because the stock price is so low. If 15 cents per share sounds impressive consider that Ford used to pay 25 cents per share.

However, anyone who bought Ford stock during the past five years lost more money in principal than they earned in dividends. The stock was $17.50 in August, 2013 and it has dropped steadily to $9.90. The next dividend will be paid on 9/4/2018. Might be a good time to dump Ford stock.

[oladub]

I agree with you that the current administration's rising interest rates is not good news for the economy. The FED rate at 2% is too high and uncompetitive. Canada's recent increase in the central bank rate to 1.5% is also too high. Trudeau wants to increase trade with Europe and other nations because of increased US tariffs, yet GB's rate is 0.5%, Europe's rate is 0.0% and Japan's rate is -0.100%. How are we supposed to compete with those lower rates?

From a chart that says today's prime interest rate is 5%. So it is still below the average and median U.S. Prime interest rate.

"Under current law, CBO projects that net interest costs will triple over the next 10 years, soaring from $269 billion in 2017 to $818 billion in 2027 and totaling $5.6 trillion over the period.""Interest costs are expected to continue climbing beyond the next 10 years and are projected to be the third largest category in the federal budget by 2026 [[after just Social Security and Medicare), the second largest category in 2046, and the single largest category before 2050."
Cumulative Average of The U.S. Prime Interest Rate:6.98%*

The Median U.S. Prime Interest Rate:6.25%*
U.S. Prime Rate All-Time High:21.50%

[Cincinnati_Kid]

^^ So in layman's terms, what does this all mean? Sorry, not well versed in prime and interest rates.

[rb336]

no, the opposite is true. Ford is shifting to a higher profit mix of vehicles. Overall volume will be down, but Focus and Fusion were barely profitable. I'd wait till $8 or so and then buy, unless it starts ticking up.

However, anyone who bought Ford stock during the past five years lost more money in principal than they earned in dividends. The stock was $17.50 in August, 2013 and it has dropped steadily to $9.90. The next dividend will be paid on 9/4/2018. Might be a good time to dump Ford stock.

[oladub]

^^ So in layman's terms, what does this all mean? Sorry, not well versed in prime and interest rates.

The Fed's rate and reflective prime rate offered by banks are still below historic norms. We don't have much to complain about yet. The Federal Reserve had been electronically printing money to keep interest rates artificially low, quantitative easing, to stimulate the economy. Seniors, who traditionally counted on living, in part, off of the interest of their life savings were hit hard by that policy. Some would argue that increasing the money supply eventually increases inflation. Interest rates, reflecting demand for borrowing, are starting to return to their historic norms. There is no reason to believe that interest rates won't exceed their historic norms. It is a natural brake on a super heated economy. When and if that happens, there will be winners and losers. A huge loser will be the federal budget because it has a $20T debt [[$5T Bush, $10T Obama), and seems to be headed for an additional $1T deficit after Trump's first budget year. Interest on the federal debt will crowd out other federal spending creating the need for some combination of higher taxes, reduced government spending, or Weimar Republic/Venezuela like inflation. When interest rates increase, the stock market suffers.

[313WX]

The question is, can today's economy support interest rates that are the historical norm?

I'm thinking no.

[Bham1982]

The Fed's rate and reflective prime rate offered by banks are still below historic norms. We don't have much to complain about yet. T

But that's entirely irrelevant.

The issue isn't whether interest rates are historically "too high" or "too low", the issue is that they're being pushed higher by a certain trolling idiot in power, threatening global economic chaos and befuddling economists of every ideological stripe.

[Cincinnati_Kid]

The Fed's rate and reflective prime rate offered by banks are still below historic norms. We don't have much to complain about yet. The Federal Reserve had been electronically printing money to keep interest rates artificially low, quantitative easing, to stimulate the economy. Seniors, who traditionally counted on living, in part, off of the interest of their life savings were hit hard by that policy. Some would argue that increasing the money supply eventually increases inflation. Interest rates, reflecting demand for borrowing, are starting to return to their historic norms. There is no reason to believe that interest rates won't exceed their historic norms. It is a natural brake on a super heated economy. When and if that happens, there will be winners and losers. A huge loser will be the federal budget because it has a $20T debt [[$5T Bush, $10T Obama), and seems to be headed for an additional $1T deficit after Trump's first budget year. Interest on the federal debt will crowd out other federal spending creating the need for some combination of higher taxes, reduced government spending, or Weimar Republic/Venezuela like inflation. When interest rates increase, the stock market suffers.

Thanks for explaining...