Ford shares hit 52-week high as 'cash for clunkers' boosts sales
Shares of Ford Motor Co. (F) hit a fresh 52-week high today, increasing over four percent to $7.48 before retreating a little. The only Detroit car company not visiting the bankruptcy court this year and not taking government restructuring funds. Ford saw a sharp increase in sales over the past week thanks to the "cash for clunkers" incentive program.
Ford executives, who spoke to reporters at Ford's product development center, said Thursday that Ford already had a strong month before the incentive program kicked in, but they could see a definite and dramatic boost since the program started.
Executives said industry-wide sales could even reach a pace of over 10 million vehicles, the highest so far this year. While some hope this finally shows signs of stabilization in the car market, which has declined to 1980s levels, vehicle sales could decline again once the incentive program ends. It's no surprise, then, that Ford said it would ask the government to extend the program above the $1 billion already allocated to it. In fact, with such a "huge success," some are worried the money will run out before the November 1 deadline.
As the only car company of the Big Three that has been gaining market share, Ford was expected to benefit the most from the cash-for-clunkers bill, which gives consumers a rebate of between $3,500 to $4,500 when exchanging less fuel-efficient vehicles for new models.
Meanwhile, while Ford had not taken any government bailout money to fund its restructuring, it has received a $5.9 billion loan from a Department of Energy program designed to help automakers develop more fuel-efficient cars. But Ford wants more and it has been amending its line of credit for that purpose. Ford has been seeking $11.4 billion.
Today, CEO Alan Mulally, who has often been cited as the driver of Ford's performance, said he has no intention of retiring before the carmaker returns to full-year profitability. While not everyone is as star struck with Mulally's performance, claiming many of the steps taken were lucky because Ford was already deep in the hole, most on Wall Street would be quite relieved to hear his intentions to stay.
Ford and other major automakers will report U.S. sales for July on Monday. I was worried ahead of Ford's second quarter report that expectations were too high, but Ford managed to shutter even the higher expectations. The company that has now become the symbol of how to do things right among the failing U.S. automakers, may once again surprise investors on Monday when it reports a very good sales month in July. As things stand, it may be just the beginning for the next few months of the program.
The question is what will happen once the program ends and if the economy will improve enough so no stimulus dollars are needed.
Update: The government is suspending the cash for clunkers program Thursday at midnight as it already committed roughly $850 million, according to calculations by the National Automobile Dealers Association and various congressional offices. It's unclear if the program will be restarted, when or whether it will expanded.
Disclosure: Melly Alazraki owns shares of Ford Motor Co.