Ford Motor Co

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Ford Motor Co

• Phillips Ngo
• Thai Pham
• Carol Linh Cha
• Xiaohan Jia
• Hsiao Hsuen
• Brian Tyson

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Company History
June 16, 1903
Henry Ford and 11 business associates with
28,000 in cash, gave birth to what was to
become one of the world's largest corporations.
1908
Model T was born
1913
Ford Motor Company's single greatest contribution
to automotive manufacturing was the moving
assembly line.
Today
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Board of Directors
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Officers Income
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TOP INSIDE HOLDER
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Breakdown of Major Holders
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Fords Statistics showed that the percentages of
trucks sold have been increasing every year since
1999, up until 2002 compared to cars, this is
probably because of the popularity of the F-150,
the Expedition, and the Explorer . Cars sales
had decreased from 1999s 40.9 to 2002s 36.6
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Industry Comparison
Automotive comparison
Market CAP
TOYOTA MOTOR
FORD
Out of 378,909 cars sold
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Market Revenue (in billions)
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Worldwide Vehicle Unit Sales (in thousands)
2/3 From North America
¼ Europe
1/10 Others
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Internal Sales
2003 units sold
Ford cars sale a great amount more than the rest
of the automotive brands.
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Company Share and Trading Information
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Financial Ratios

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Ford Motor Co. has much lower sales (QTR vs year
ago qtr) than the industry (WEAK). This is
probably because the revenue growth of
competitors such as DaimlerChrysler AG and
General Motors Corp were much higher than Fords.
The 5-year annual average on sales is close to
the industries average but well below the SP 500
average. (WEAK)
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Price Ratios
The current P/E ratio for Ford is higher than the
industry but much lower than the SP average.
(FAIR). This is probably because Ford has a much
lower earnings per share than Toyota and GM. The
price/book value of Ford is relatively close to
the industry and the SP 500. FAIR
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Profit Margins
Although Fords gross margin is similar to the
industrys gross margin, it is considerably lower
than the SP 500. FAIR. This shows Fords
inefficiency in costs in relation to the revenue
the company brings in. Also, the net profit
margin is below both the industries and SP 500
again displaying Fords high costs, its overall
profit margin percentages are weak. WEAK
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Financial Condition
Fords debt/equity ratio and leverage ratio are
both extremely high compared to the industry and
the SP 500, attracting risk neutral (or less
risk-adverse) investor. But even with very high
debt Ford still has a lower interest coverage
than the SP 500 and the industry. Meaning that
Ford is weaker at paying the interest on the debt
even though it has a huge debt (WEAK). The
current ratio of Ford is slightly higher than the
industry and the SP 500 meaning Ford is a little
more liquid (WEAK).
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Investment Returns
Fords return on equity is very similar to the
industry and SP 500. (FAIR). Also, the return
on capital is lower than Industry and SP 500.
It shows that its resell of capital assets and
securities are low (POOR). Ford also has a lower
return on assets than both the industry and the
SP 500, it displays poor use its current assets.
Ford probably has too much inventory or
warehouses that are not as efficient as the other
companies.
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Management Efficiency
Fords Net Income/Employee is significantly lower
that Industry and SP 500. But its
Revenue/Employee ratio is higher than Industry
and SP 500. It illustrates that Ford has higher
revenue, but little net income, because the
company incurs high production cost. (POOR).
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Holding Period Return
Paid 40 cent dividend for each year for past 3
year Negative HPR in 2002 due to net loss Price
drop at beginning of 2004
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Free Cash Flow and Cost of Equity
DCF Model
CAPM Model
Negative income in 2002 and 2001 caused negative
FCFE and Ke. Fords stock is currently
underpriced as of 2/26/04 Because DCF Model
0.7509 CAPM Model 0.02543
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Market Efficiency Analysis
Company Specific News
Appoint Stephen G. Butler to Board of
Directors Decided its good news. Before the
announcement date price increased, but decrease
after. So, No form, because it doesnt reflect
any form of Market efficiency
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Market Efficiency Analysis
Non-Company Specific News
OPEC announces that it will cut oil production by
1 million barrels a day. Decided this is bad
news. Fords stock price declined briefly
before and after the announcement date. If we
only look at a 3 day period, the chart showed a
weak form of market efficiency
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Five-Year Stock Analysis
The chart shows Fords 5 year stock behavior.
Decline starting in Jan 01 due to declined sales
in domestic auto market. Pension shortfall in
July 02 Even with much fluctuation, and
struggling, Fords stock price is at their
mid-range.
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Risk Analysis
Beta COV(RIBM, RSP500)/VAR(RSP500)
Experts had calculated a 1.33 beta for year 2004
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Cost of Capital and Optimal Capital Structure
.WACCWeKe Wdkd(1-T) Wp Kp
2003
2002
2001
We
0.041
0.049
0.029
Wd
0.96
0.95
0.97
Wp
0
0.00058
0
Ke
0.13
0.11
0.09
Kd
0.033849
0.049395
0.060585
Kp
0
11.8
0
WACC
0.034387432
0.04547612
0.04265
Using High Beta and High Debt to estimate Ke
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Kd has been decreasing due to lower interest
rates.
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Optimal Capital Structure
Model III capital structure consists agency cost,
bankruptcy cost and financial distress
cost. Unrealistic way to calculate because it
need 10 years of data.
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Fiscal year 2003
Past 3 year, debt is above 95 each year. The
reason Ford can maintain its financial standing
is because it has lower Kd each year
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Conclusion
Conclusion
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SELL STOCK

• HPR of Ford is negative for 2004
• High amount of debt, high production cost, net
  losses for 2002 and 2001
• low interest coverage
• We as a group rate for as a SELL

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BUY STOCK

• Efficient market hypothesis, we might take
  another stand point on Ford.
• We feel Ford has a lot of room to improve on in
  the near future.
• So, we are confident that Ford will work out the
  inefficiencies. By improving on some of the
  obvious flaws in the company, Fords stock price
  has plenty of potential to rise.
• Therefore, assuming EMH, we look at Ford as a BUY.

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THE END