This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Ford at $9: A Second Chance to Buy Alan Mulally's Crisis Management

DETROIT ( TheStreet) -- It appears that investors are getting one last chance to bet on the management skills of Ford (F - Get Report) CEO Alan Mulally.

The opportunity seems an appealing one. Most stock buys, after all, are bets on management, and Mulally is viewed as one of the country's top CEOs. He succeeded at Boeing (B) and he has already turned around Ford once. Now, it appears that for an encore he needs to turn around Ford's operations in Europe, which the automaker said will lose $1 billion this year.

Ford closed Thursday at $8.96, down 1 cent. The last time the shares fell as low as $9 was in December 2009. Year to date, Ford shares are down 18%, while GM (GM) is down 8% -- perhaps because GM investors have not yet priced in Europe's problems.

Mulally is 67 years old and is often questioned about when he will retire. A typical non-response: He told TheStreet in April that "the best is ahead of us (and) whenever I leave, the Ford team will continue to keep Ford soaring." Ford Chairman Bill Ford has said that Mulally can stay as long as he wants.

Mulally could have left at 65 when he and Ford were on top, but he chose to stay. It does not seem likely that he would choose to walk away with Ford in the middle of a winnable battle to turn things around in Europe.

On Sept. 5, 2006, the day Mulally signed on at Ford, the shares closed at $8.39. The Detroit Three, not surprisingly, were viewed as bankruptcy candidates. Ford shares slumped as low as $1.50 in February 2009, then began a recovery. The shares ended 2009 at $10, up 334%. They reached a high of $18.97 in January 2011 before beginning another slide.

The job in Europe is difficult, but on the Ford earnings conference call Wednesday, executives made it clear that they know what has to be done.

"We fully understand what it takes to be profitable," said Chief Financial Officer Bob Shanks. "It isn't just a cost story: There are tremendous opportunities available to us on the revenue side. I would go back and look at what we did in North America, which was comprehensive." The One Ford formula, of course, includes both raising revenue, partially by introducing new products, as well as cutting costs with tools including global platforms as well as capacity reductions.

Mulally also answered an analyst's question about why investors have allowed Ford shares to fall to $9.

"It's in the context of a very tough biz environment," particularly in Europe, Mulally responded. "We have a tremendous presence and operation in Europe. We have made money there six of the last eight years. But we are seeing very significant deterioration in the economy and the industry. And so I think that is weighing on people's minds.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BA $134.01 -0.59%
F $13.62 0.44%
AAPL $93.64 -0.11%
FB $118.57 0.84%
GOOG $698.21 0.75%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs