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ECON 118: FINANCIAL ACCOUNTING AND DATA ANALYSIS

ECON 118: FINANCIAL ACCOUNTING AND DATA ANALYSIS. Automotive 2: Qianyun Hu, Joe Lent, Fei Yuan, Lindsay Appell, Chia Chi Wu. 3/5/2013. Ford: America’s Greatest comeback story!. Ford Overview. American multinational automaker headquartered in Dearborn, Michigan.

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ECON 118: FINANCIAL ACCOUNTING AND DATA ANALYSIS

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  1. ECON 118: FINANCIAL ACCOUNTING AND DATA ANALYSIS Automotive 2: Qianyun Hu, Joe Lent, Fei Yuan, Lindsay Appell, Chia Chi Wu 3/5/2013

  2. Ford: America’s Greatest comeback story!

  3. Ford Overview • American multinational automaker headquartered in Dearborn, Michigan. • Founded by Henry Ford in 1903 • Two brands: Ford and Lincoln • Employed about 213,000 people • Around 90 plants and facilities worldwide • The 9th ranked overall American company in the 2012 Fortune500 list

  4. Subsidiaries • Ford to Australia • Ford to Brazil • Ford to Britain • Ford to Germany • Ford to Argentina • Ford to Canada • Ford to India • Ford to Japan • Ford to Korea • Ford to New Zealand • Ford to Philippines • Ford to Taiwan

  5. Executives

  6. Ford dominates the U.S. News & World Report 2013 Best Cars

  7. Liquidity

  8. Efficiency

  9. Efficiency

  10. Solvency

  11. Net Profit Margin in 2012 *Industry standards from Yahoo Finance

  12. WHAT DO YOU WANT AS AN INVESTOR?

  13. Rank: 1/68 Rank: 4/68 *Industry standards from Yahoo Finance

  14. Price Earnings Ratio: Actual & Expectations Industry PE ratio: 18.7 *Industry standards from Yahoo Finance

  15. Earnings Growth *Industry standards from Yahoo Finance

  16. The BEST Way to Evaluate a Company: The Price Earnings to Growth Ratio (PEG) Ford’s PEG: 0.87 Rank: 7/68

  17. Market Capitalization *Graph from Wik Invest

  18. *Graph from Wik Invest

  19. Effective Tax Rate

  20. Industry Sales Volume (in millions) Number of Employees

  21. Dealership Statistics • We have 11,619 dealerships • In 2012 per dealership: • Wholesales were 488 • Revenue was $10,895,000 • Average vehicle price: $22,326 • Profit was $538,428 • Average profit per vehicle: $1,103 • Profit margin per vehicle: 4.94%

  22. Managers’ Average Salaries *Ford statistics from glassdoor.com, industry standard from Indeed.com

  23. Employee Benefits

  24. Excellent Management • Communicate with stakeholders • Be simple and clear • Invest in the future • Change • Reach out and touch someone

  25. “A recovery EVERYONE can see coming” • Industry analysts estimate this quarter’s rise in sales are here to stay • Ford’s perception of quality has risen 37% since 2008 • Paying dividends for the first time in six years • Stocks will benefit from the Federal government stimulus plan • Ford’s stock has risen 21% since the government announced its newest round of bond purchases in September

  26. SWOT Analysis – Strengths • $34.2 billion growth in R/E since 2008 • Management: • Cut automotive interest expense 92.64% • Saved almost $9 billion • Did not need a bailout during the financial crisis • Hybrid vehicle industry leader • 5 of the top 20 selling vehicles • Most of any company • Ford family owned since 1903

  27. SWOT Analysis – Weaknesses • Declining profits and efficiency in Europe • Shift European resources to Asia Pacific Africa sector • Underfunded pension plan • Pension liabilities using PBO: $18.8 billion (worldwide) • Only 10.77% of our total liabilities • Pension payoff using ABO: $15.45 billion (worldwide) • Only 8.85% of our total liabilities • High debt • Reduced debt 25.9% since 2008 • Weak dividend history  began paying in 2012

  28. SWOT Analysis – Opportunities • We sell vehicles to rental car companies as operating leases with guaranteed repurchase options • Increased demand for rental cars because of Hurricane Sandy create new opportunities in this market • Our stock is currently undervalued • We are becoming more efficient because of the One Ford Plan

  29. SWOT Analysis – Threats • Foreign currency translations made Japanese companies more competitive in 2008-2012 • Currently the Yen is becoming weaker • Other companies • Challenge us for market share • Marketing risks • Competition with luxury vehicles • Negative perception of American vehicles • Interest rates • Lower rates mean lower borrowing costs but also means lower financial services revenue

  30. Future Outlook – Regional Growth Growth in North America

  31. Future Outlook – Regional Growth • Increasing brand reputation • Focus on growth in the core Lincoln and Ford brands • Growth in sales of hybrid vehicles • Increasing production

  32. Future Outlook – Regional Growth Growth in Asia Pacific Africa

  33. Future Outlook – Regional Growth • Aggressive restructuring • Increased investment • 2012: 2 new manufacturing plants opened in the region • Mid-decade: 7 more manufacturing plants will be opened • 2013: Lincoln will be sold in China for the first time

  34. Consumer Driven Product Development New Technology Fuel Efficiency • MyKey • Inflatable Seat Belts • Park Assist • Silicon Valley Lab • Partnership with Microsoft • Ford Developer Program • Allows developers to create apps that are compatible with SYNC voice control • Gas, Hybrid and Electric capability on every vehicle • 2013 Ford Fusion Hybrid ranked #1 Hybrid Car by US News

  35. Reduced Cost Achieving Economies of Scale • Platform Consolidation • Supplier Consolidation

  36. Future Benefits of Economic Scale

  37. Analyst Firms Making Recommendations ARGUS RESEARCH B OF A M L BARCLAYS CAPITA BUCKINGHAM RES CRAIG-HALLUM CREDIT AGRICOLE DEUTSCHE BK SEC EDWARD JONES GOLDMAN SACHS J.P. MORGAN JEFFERIES & CO. KEYBANC CAP MKT MORGAN STANLEY RBC CAPITAL STERN,AGEE&LEAC STIFEL NICOLAUSUBS Detailed Analyst Recommendation Ford's stock was named the 2nd best stockto invest in as of March 1, 2013 *According to Bloomberg

  38. Cost of Goods Sold • Foreign currency hedging activities • Foreign currency translation • Bad debt expenses • Research and development cost • Better management of material’s handling • Reduce cost of Pension Plan

  39. Selling, Administrative, and Other Expenses • Foreign currency hedging activities • Foreign currency translation • Advertising cost decreased • 2 billion operating leases in 2008

  40. Automotive Interest Expense • Lost due to hedging transactions • Interest on other losses • Losses related to Mazda • 5.09% Interest rate on debt

  41. Financial Service Interest Expenses • Started in 2010 • Borrowing more money to spend in financing our credit operations which allowed us to grow almost 20 billion in sales. • Declined since 2010 • Interest expenses on securitization debt related to consolidated VIES decreases • Discounts, premium and cost related to the issues to debt • Gain and losses on the extinguishment of debt • Derivatives and Fair Value hedges

  42. Automotive Interest Income and Other Income • Realized and unrealized gains on cash equivalents and marketable securities • Gains on the held-for-sale operations, equity and cost investments, business combinations, and other dispositions • Gains on extinguishment of debt • Especially in 2009

  43. Equity in Net Income of affiliated Companies • Special item loss in the Financial Service sector • 132 million • About 64 million growth in North America investment • About 100 million growth in Europe investment • About 80 million growth in Africa investment

  44. Deferred Income Taxes • Assured of future earnings • Reduced our valuation allowance • Increased Net Deferred Tax Assets • Which reduced Income Tax Expense • Thus giving us (132.9%) effective tax rate

  45. Deferred Tax Assets • Income tax expense matches our income tax liability to the taxable event that we incurred that year. Deferred taxes do not reduce income tax expenses. They nearly reduce what we paid in cash. • On our tax slides, we only paid 16.7% of our income tax expenses in 2012.

  46. Strength – AVTM Program Loans • In 2009 we entered into a U.S. Department of Energy loan agreement to provide us with $5.9 billion in loans, at an interest rate of 2.5%, to finance energy efficient product development • We began repaying these loans in September 2012, and as of December 2012 there is $5.6 billion outstanding

  47. Sector vs. Sector Debt to Assets Too much debt?

  48. Other Post-Retirement Employee Benefits • 2012: $409 million • We care about our employees

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