Ford: Strengths, Weaknesses, Opportunities, Threats
Ryan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. Fresh of an shaky third quarter earnings report, in which the company reported a fall in revenue and income, yet forecasted higher than expected forecasts, I would like to pinpoint on one of the companies that built America into the industrial giant that it is today, the Ford Motor Company (NYSE: F).
- Stability and Predictability: The Ford Motor Company was founded in 1903 and has been serving the world’s consumers with quality automobiles for decades, and will not be going away any time soon
- Brand Recognition and Loyalty: The iconic Ford logo is known by nearly every person in the world, and many potential car buyers flock to their brand because of their long track record of producing quality cars
- Recovering Sales Growth: The company’s sales have taken a major hit over the past 5 years, going from nearly $150,000 million in 2007, to an estimated $125,000 million in 2012, however the sales slide has seemed to bottom and is projected to reach 2007 levels by 2016
- Dividend: Ford had a tremendous track record of dividend payouts, until when in 2006 they halted payouts, however they have resumed their dividend program and currently pay out quarterly dividends of $0.05, which annualized puts the company’s dividend as yielding 1.83%
- Global Presence: The company sells vehicles in 180 countries around the world, and has a presence so strong it would take a cataclysmic shift in the automotive industry to derail their success
- Saturated Nature of Business: The company has a presence in nearly every country in the world, so there may not be much run left to run
- Recent Disappointment: When the company reported third quarter results they reported year over year revenues falling 3.2%, and year over year earnings remaining steady, which by many analysts’ forecasts was well below expectations
- High Exposure to Europe: 28.13% of Ford’s volume was derived from European sales in 2011, a market that is more likely to contract in the coming years than expand, as the people in the European Union face potential necessary austerity measures
- Low Exposure to Asia-Pacific: Only 15.82% of Ford’s volume was derived from Asia-Pacific sales in 2011, the fastest growing segment of their business (7.52% growth from 2010 to 2011)
- Product Innovation: Much of Ford’s success can be credited to their long history of innovating, and into the future this trend of constant innovation and new products is very likely to continue
- Electric Automobiles: One major sector that is primed with opportunity is the electric automobile market, as the world looks for an eco-friendly alternative that operates like the original gas-guzzling car
- Dividend Growth: At their peak, Ford doled out quarterly dividends of $0.30, and while this number may not be realized for several more years, dividend growth is projected in the near future
- Emerging Market Growth: The meat of Ford’s business is locked up in the European and North American markets, however the company does possess a significant share in emerging markets such as South American and Asia-Pacific regions, which should provide immense growth into the future as the middle class in these countries grow and earn the money to spend on automobiles (2010 to 2011 unit growth: South America: 3.48%, Asia-Pacific 7.52%)
- Intense Competition: The automobile industry is one of the most competitive industries in the world, and this fierce battling to provide the best product for the lowest price can lead to margin contraction
- Economic Downfall: When there is economic prosperity more people have the ability to purchase large-ticket items, such as automobiles, however according to the large majority of economists, the world is in for at least a couple more years of misery
- Debt: The company still has $13.1 billion left on their balance sheets from loans taken out during the great recession, however has paid down $20 billion of their debt in the past two years
Major publically-traded competitors of Ford include Toyota Motor Corporation (NYSE: TM) and the General Motors Company (NYSE: GM). Toyota, like Ford produces automobiles of all sizes and styles, and competes with Ford in all of their core markets. Toyota has recently experienced major problems when the Japan tsunami drastically disrupted production; however the company is almost back to normal. General Motors is also riddled with massive debt, and like Toyota, competes with Ford in all of their core markets.
The Foolish Bottom Line:
Ford possesses several strengths, weaknesses, opportunities, and threats, however in the end appears to a company on the trail back to its glory days. The massive debts the company still has yet to pay off are highly concerning, and weigh heavily on the company. When these debts are paid off, I believe Ford will be a financially strong company with a strong presence in emerging markets, but until then I would not invest in this American legend.
makinmoney2424 has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.