Q:

Can meaningful truck-share gains weaken Ford's overall stock value?

A:

Quick Answer

Truck share gains would only serve to strengthen Ford's stock value, according to Barron's. It's the stock of Ford's competitors, like General Motors, that may weaken as Ford ramps up production of the F-150.

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Full Answer

The global market for automobiles is highly cyclical, and a broad downturn in demand could certainly cause a decline in Ford's share price along with the rest of the industry. However, the company is well-positioned. On April 22, 2014, ratings agency Fitch changed its rating outlook for Ford's credit worthiness from stable to positive. Fitch is encouraged by Ford's North American profitability and strong liquidity position. While Fitch expected Ford's pre-tax profit to be down in the latter half of 2014 due to new product launches, the agency believed the refreshed vehicle offerings would set the company up for a profitable 2015.

Fitch points out that F-150 truck is Ford's best-selling vehicle in North America and also one of its most profitable. Ford used more aluminum in the production of the 2015 F-150, making it a more fuel-efficient vehicle than the standard full-size truck. While Fitch sees some risk in this strategy related to customer acceptance, the agency also believes it may support premium pricing for the new model.

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