Ford poses challenge to Toyota with high market value

Bloomberg

Sun, Oct 27, 2013 - Page 13

Ford Motor Co’s market value is reaching levels last seen in 1999, putting the company closer to its historical peak than the world’s biggest automaker, Toyota Motor Corp.

For much of Thursday, Ford traded at a market capitalization of more than US$70 billion, a level it has closed at only three times in the past 14 years, according to data compiled by Bloomberg. That left the second-largest US automaker within about US$6 billion of its peak valuation in May 1999. Toyota ended the day US$30 billion short of its US$254 billion high reached in February 2007.

The higher value investors are placing on Ford followed a 17th-straight quarterly profit that showed progress in CEO Alan Mulally’s plan to extend beyond sales of trucks and sport-utility vehicles in developed markets that used to be the company’s strength. That Ford is on track to beat Toyota back to its all-time valuation also reflects a changed environment in which Detroit is competing with its best line of cars in a generation.

“Not only is Ford challenging their own previous peak and are closer to it than Toyota, but Ford is competing with Toyota the way it wasn’t before,” Kevin Tynan, an auto analyst for Bloomberg Industries in Skillman, New Jersey, said by telephone. “It’s a competitive landscape that Toyota really hasn’t had to deal with in maybe 15 years.”

Ford’s gains also demonstrate faith that Mulally, 68, has established a team that can excel after his eventual departure. The executive reiterated on Thursday the company’s plan for him to remain CEO through at least next year. Microsoft Corp board members have spoken with Mulally about becoming its next CEO, people with knowledge of the talks have said.

“It’s either going to be now or later, but there’s going to be a leadership change, and we feel pretty confident that the bench he has behind him has the expertise to run the business,” said Michael Razewski, a principal at Douglas C. Lane & Associates, which oversees US$3.4 billion, including Ford shares.

At least six analysts have increased their price estimates since Thursday, raising 18 analysts’ average for where the shares will rise to in 12 months to US$19.92, according to data compiled by Bloomberg. Among analysts surveyed, Ford has 14 buy ratings, nine holds and one sell.

For all the gains Ford is making, investors still place a higher market value on Toyota City, Japan-based Toyota — by more than three-to-one. Asia’s largest automaker delivered 4.91 million vehicles in this year’s first half, outselling Ford’s 3.18 million.

Toyota faces challenges in some of its most crucial segments. The Camry sedan, which probably will extend its reign as the top-selling US car to 12 years, has a slimmer lead this year as Ford’s Fusion has contributed to market share gains.

General Motors Co has reworked its Malibu sedan and its Impala won Consumer Reports’ distinction as the best sedan in the market.