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Friday, May 06, 2005

Ford is not Junk



Standard and Poor downgraded Ford and GM to junk bond status according to this article from the Detroit Free Press. For GM I agree with this rating, for Ford I do not.

One aspect that went into the decision for the downgrade was both companies' dependence on SUVs, specifically those coming in the future. While that is true for GM, Ford is coming out with an all new midsize sedan, the Fusion. It's a lot flashier than anything else in the segment, and it's built on the Mazda 6 platform. I think it's competitive. That should have gone into their analysis. Ford also has invested heavily in hybrids, was the first manufacturer to make a hybrid SUV, and makes a competent gas sipping small car in the Focus. I think the analysts here are reacting to the poor profit news of Ford in recent days, rather than the true potential of the company.

Updates will slow this week, but afterwards I will be much more committed to this blog. I am in the middle of finals and it very hard to think of things to write about, with the possibility of impending doom from flunking out of grad school if I don't do well always lurking in my mind. So bear with me, I have some interesting ideas I want to implement.

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Monday, May 02, 2005

Oh Wow.

The Detroit Free Press is having a really well done three part series on the fate of General Motors. The first two parts basically tell us what has happened at GM, but it's the third article that came out today that I find fascinating. Here's an example:

GM, though, has firmly stood by its position that it doesn't think gas prices are having much impact on sales of full-size trucks.


"I know it's popular to write the obituary on large trucks because of gas prices," Paul Ballew, GM's executive director of global market and industry analysis, said during a conference call in April.


He added that it's "hard for us to find a lot of evidence to support that."



If that's the case, Paul Ballew needs to start updating his resume. That's just asinine. The evidence that fuel prices will increase indefinitely over the long term is just enormous and obvious. Don't believe me? Then why is EVERY OTHER MANUFACTURER putting more of an emphasis on cars and crossovers? Is GM being bold and innovative and about to rock the market by staying with something virtually every auto analyst out there says is gone, i.e. the SUV fad?

One factor people need to take into account is that buying fuel is something a person does regularly, and usually is an appparent expenditure. What I mean by that is that a person KNOWS when he is spending more money as gas prices rise. It's not an unconscious expenditure like food, or paying rent.

It was this quote from the article that just killed me:

In order to bring the new [SUVs] to market by Jan. 1, GM has pulled engineers from an important car-development program in order to help.

That at about says it all.

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