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Invest in Ford?

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  • Description

    Sterne Agee Managing Director Michael Ward gives his outlook for Ford earnings.

  • Duration 4:03
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-- Ford -- to report earnings before the opening bell tomorrow my next guests have the bio on the stock and says this is an important turning point for the automaker turning out my sport minute.

-- -- -- and Michael -- that this is an important turning point between being a restructuring story to being an investment story what are the signposts that tell you where there are.

Well thank you for having me Melissa well I think there are a lot of -- you know first off Ford spent in restructuring mode for about five years.

Cutting capacity cutting cost cutting debt on its balance sheet.

Restructuring its product -- and it all seems to come together right about now when I think you'll see one of the last steps -- that.

Within when they reversed -- -- Deferred tax asset in the fourth quarter which will obviously have a big impact on the fourth quarter results.

Where -- strengths right I mean one is small vehicles racing to be pretty popular.

It no doubt small vehicle back and about 2006 when -- Mulally came on board that a conservative concerted effort to kind of the redo their small vehicle platform and that's paid off small vehicles if you look -- -- the United States they've gained from about.

28% of the market back in 2005 -- reported percent today.

And Ford is in second place in that segment of the market place.

With a lot of all new vehicles on a globally competitive cost structure and that gives them an advantage in the marketplace where -- -- weakness.

This the biggest concerns I think with Ford with the entire industry or in Europe and in south American the fourth quarter.

Okay.

What do you think that you mention was Alan Mulally he's obviously strength of the company there had been some rumors.

You know that he was potentially going to step down -- there any truth to that is our succession plan in place.

Well I think hopeful for his -- at some point whole -- step down but I think Alan Mulally has been incredible CEO for purported for the auto sector.

I think one of the things that the auto industry is -- -- job with over the last several decades.

Has been -- planning and in my mind that should be job number one of the board so I think part of what we're hearing right now is that the Ford board of directors.

Is going through the process to look at -- planning.

And that's probably two to three your process so in many respects I think it's very good and it's it's probably -- healthy process.

To take place even -- -- even if it means that -- while he's not gonna step down for another two to three years you should have a good successor lined up.

How -- you trade the stock at a earnings target that there's a chance they're gonna surprise the upside would you -- it what would you do.

It the earnings are gonna sloppy tomorrow you have you know big reversal of an investment tiger period -- tax reversal -- tax credit.

You have to provide information about an unfunded pension liability planning assumptions so there -- a lot of moving pieces in a complex industry to Begin with.

So I'm always reluctant to own stocks.

On on a big upside surprise but I think longer term I think Ford is a very strong stock to -- in an improving cycle.

And did they are well positioned as better and better position than any other vehicle -- manufacture.

To take advantage of an improving industry and yeah American particular.

It's like you really like the stock they may be weak tomorrow morning after earnings in May be does that provide an entry point.

I think that's the right way to play.

You know it is afford it in many auto companies have difficulty on calls going through so much data and I think you'll see some of that tomorrow it's a very complex call.

And speak your -- what would be your first question on a conference.

I think the biggest question I would have it would be what are they gonna do with their cash at the -- is generating about a billion dollars of cash a month.

The everyday he's basically completed the restructuring efforts but -- -- -- investors have been patient so it's either just reinstated the dividend.

What are some other long term plans do with cash.

Yeah would you like to see -- increased that it is that we are -- I think the thing that makes most sense to me is some sort of a year and extra much like what -- does -- several European companies do it.

And if there is some sort of a formula that's very constructive at the end of the year they have a couple of billion dollars extra cash.

Given to shareholders and in the year and extra dividend.

-- Michael -- I feel ready for the earnings call tomorrow thanks so much.

Thanks revenue we really present and tomorrow and --

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