Author Topic: Ford  (Read 3243 times)

woodstove

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Ford
« on: March 31, 2009, 12:34:36 PM »
Would Ford make an appropriate opportunity for Berkshire?  Curious what others think.

Emotive overview ... we may have reached max pessimism re US domestic auto industry.
Share prices are up from lowest, but optimism is down, and this feels like capitulation
regarding possible bankruptcy filings for GM and/or Chrysler.

Imagining that there will be a US auto industry going forward, and Ford is essentially
family controlled, this seems an opportunity for Berkshire to provide capital and take
a meaningful share, say 15 pct of the operating business's future earnings potential,
with an option to acquire larger / control block should the Ford family want to sell.


kawikaho

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Re: Ford
« Reply #1 on: March 31, 2009, 01:07:00 PM »
Buying shares of GM would be like gambling at this point.  You're betting that they either get more financing from the gov't or not.  That's not investing. 

JAllen

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Re: Ford
« Reply #2 on: March 31, 2009, 01:16:01 PM »
No.

woodstove

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Re: Ford
« Reply #3 on: March 31, 2009, 01:24:23 PM »
Ford - not GM - is what I'm wondering about.

Ford seems to have taken a sensible approach - lock in credit availability some time back,
draw down credit lines recently to protect against reluctance of banks to follow thru,
buy back debt at substantial discount, and continue to focus on operational business.

Whether they can survive is an interesting question.  Particularly if GM gets special cased
by Fed govt - but I'll bet that Ford can negotiate corresponding benefits at a later date,
without having to go thru the meddling in company operations that GM is now enduring.

A decade from now there will be at least one US major auto manufacturer.  It seems to
me that Ford might be the best candidate of the three.  But financing from Berkshire to
strengthen balance sheet, perhaps retire more debt at discount to par, may be helpful.

Berkshire's participation might not necessarily be via common shares.  Maybe a preferred
such as was done for Goldman Sachs and General Electric.  I think Berkshire's ideal would
be to have a substantial exposure to operational earnings of Ford over long term, with
a protection for downside if Ford common gets substantially diluted, and maybe also a
protection against nationalization of the industry being extended to Ford as side effect
of the GM restructuring process.

enoch01

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Re: Ford
« Reply #4 on: March 31, 2009, 01:57:03 PM »
Ford - not GM - is what I'm wondering about.

Ford seems to have taken a sensible approach - lock in credit availability some time back,
draw down credit lines recently to protect against reluctance of banks to follow thru,
buy back debt at substantial discount, and continue to focus on operational business.

Whether they can survive is an interesting question.  Particularly if GM gets special cased
by Fed govt - but I'll bet that Ford can negotiate corresponding benefits at a later date,
without having to go thru the meddling in company operations that GM is now enduring.

If either GM or Chrysler get restructured, then who knows how competitive Ford will be at that point.  It seems to me you have to make A LOT of assumptions to make any investment case here.  I think it was the Charlie Rose interview Buffett gave after his donation to the Gates fund where he said he had no idea how to value GM, particularly because of future liabilities.  My guess is that the same would go for Ford today.

I also tend to think he sees many other choices right now that represent lower hurdles over which he has to jump.

E

SharperDingaan

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Re: Ford
« Reply #5 on: March 31, 2009, 02:31:31 PM »

Assume that Ford gets to pension off workers on the same terms as GM/Chrysler .. in return for purchasing & running a consolidated GM/Chrysler/Ford .... & a whack of tied fed funds/guarantees as a bridal dowry. They would be the most competitive car company in the world.

Most would expect they'd also need to raise some domestic capital.


KFRCanuk

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Re: Ford
« Reply #6 on: March 31, 2009, 03:23:05 PM »
Ford - not GM - is what I'm wondering about.

To me, Ford is in the same situation as GM/Chrysler. The difference is that they raised capital before the credit crisis and thus look smarter.

Don't get me wrong though Ford and GM have finally some great products. Chevrolet Malibu fit and finish is pretty darn close to Audi. Chevrolet Volt will be a revolution. Ford Flex/Edge and Tauraus are definitely great steps forward.

kawikaho

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Re: Ford
« Reply #7 on: March 31, 2009, 03:37:50 PM »
My post was in regards to this feeling like capitulation regarding GM and Chrysler.  I don't think this is capitulation; it's more like doomsday for the US automakers.

How expensive is the Chevy Volt going to be??  40k??  I have reservations on how that will sell.  I think GM and Ford have a profitable niche in heavy machinery and heavy duty trucks.

ericd1

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Re: Ford
« Reply #8 on: March 31, 2009, 03:45:39 PM »
I'd buy a $40K Volt...just so I could plug it in my garage at night...I hate filling up in the bitter cold...LOL

Plus we need to reduce our dependence on foreign oil!

woodstove

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Re: Ford
« Reply #9 on: March 31, 2009, 04:19:16 PM »
I like Sharper's idea for combining operations.  Well, if happens, would be great if BRK had window on it.

About dependence on oil ... went today with grandson to the Oil Museum in Oil Springs, Ont - very good museum.
They are a lot more hands-on than most museums.  Oil tank car there, and grandson climbed up on it - I've never
had opportunity to climb on rail cars myself (only got a can of spray paint recently, designed my "tag" so I can
take up defacing election signs in future).  They have a hand pump, used at old gas stations for dispensing
motor oil - bring your own jug, pump motor oil into it.  Really worked, dispenses oil - kids could get really dirty
(but did not).  Grandson was very interested in fact that road surfaces are made mostly of oil (asphalt).