Ford Motor Co.
) surprised investors by doubling its quarterly dividend payment
to 10 cents from 5 cents for the first quarter of the year. The
news sent the stock to the highest level of $13.83 since July
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The increased dividend will be paid on Mar 1 to shareholders of
record as on Jan 30. The automaker last paid a dividend of 10
cents per share in June 2006, which was reduced to 5 cents in
Ford is the only Detroit automaker that survived the global
economic crisis without seeking bankruptcy protection unlike
General Motors Company
) and Chrysler.
Ford resumed its dividend payment at the beginning of 2012 after
suspending it for more than five years in order to cope up with
the impact of global economic crisis. The resumption of dividend
came after posting the largest profit in 2011 since 1998.
Last year, the company regained its investment-grade ratings from
two agencies, including Moody's recently, and got its iconic blue
oval back following the release of all the assets pledged while
securing the $23.5 billion loan in 2006 for its turnaround plan.
The upgrade was driven by the company's strong market position
and higher profitability in North America, high cash balance,
ability to match production with market demand and sound
operating and financial management.
Ford lost its investment grade rating in 2005 soon before it
borrowed $23.5 billion for restructuring in 2006. The automaker
pledged all its domestic assets including the trademarks for its
logo, the F-150 truck and the Mustang sports car for securing the
Ford now made a comeback after six years by undertaking effective
restructuring measures. The measures include cost reductions,
renegotiating UAW contracts, and streamlining global operations.
The company's latest decision to raise dividend is backed by its
strong balance sheet, improved liquidity, promising business
outlook and recovery in the automotive industry.
Ford had cash and marketable securities of $24.1 billion as of
September 30, 2012, up from $20.8 billion in the corresponding
period a year ago. Total Automotive debt was unchanged at $14.2
billion at the end of the quarter compared with the same at the
end of the second quarter of the year.
The automaker made its last drawdown of low-cost loans for the
development of advanced vehicle technologies in August and began
repayment in September. The company also paid $600 million to its
worldwide funded pension plans, including $500 million in
discretionary payments to U.S. funded plans.
Auto sales in the U.S. grew 13.4% to the five-year high of 14.5
million vehicles in 2012 including a 9% rise to 1.4 million in
December last year. A host of macroeconomic factors helped the
industry reach the height. They include improving consumer
confidence, falling unemployment and improvement in home sales
Sales were also fueled by strong pent-up demand, due to both
aging vehicles (average age of a car reached 11 years in the
U.S.) and the need to replace damaged vehicles from Hurricane
Sandy. Banks were also friendlier as they offered greater access
to loans with lower interest rates.
Ford's sales edged up 4.7% to 2.3 million vehicles in 2012,
including a 1.9% gain in December to 214,222 vehicles, as sales
of some of its highest selling vehicles, Ford Escape SUV (2.6%
gain) and Fusion sedan (2.7% decline), were hurt by vehicle
safety recalls. However, the company's market share reduced to
15.5% in 2012 from 16.8% in 2011.
Further, Ford expects to lose between $500 million and $600
million in 2012 in the 19 European markets covered by the
automaker owing to the ongoing debt crisis in the region. The
figure compared with a meager $27 million loss recorded by the
company in 2011. It also expects market share in Europe to be
lower than 8.3% in 2011.
However, the automaker expects to meet challenges in the U.S. and
Europe by executing its "One Ford" plan. The company aims to
revive sales by rolling out new models. It plans to launch as
many as 6 new Lincoln models in the next 3 years, including a
small car in 2014. It also plans to roll out as many as 20 new
models in Europe over the next three years.
Ford is also pursuing a major expansion plan in emerging markets,
primarily Argentina, Brazil, China, India and Thailand. The
company expects Asia to account for 70% of its global growth in
this decade, mostly from China and India.
The company revealed that it expects global sales to expand by
50% to 8 million vehicles by 2015 given the potential growth in
Asia, mainly China and India; and rising demand for small cars.
The automaker anticipates small cars to account for 55% of the
total sales by 2020, compared with 48% presently.
The stock currently retains a Zacks Rank #3 (Hold).