I recently read an interesting article about Ford and the new process they use before they approve funds for new models, or updates to old ones. Apparently they really push their engineers to lighten up the vehicles as much as they can, using different materials such as magnesium, and different techniques to keep making the vehicles lighter, thus enhancing gas milage. The article said that Mullally won’t sign off on any project unless they are going to be best in class in milage. The new Explorer, soon to be unveiled, is supposed to be the bomb. I have owned three Explorers in a past life.
I wrote a while back about FPRS, a preferred of Ford that I own.
Here is the skinny on it:
- FprS can be converted into 2.8249 Ford common shares any time before January 15, 2032.
- It pays a $3.25 annual dividend per share (currently 6.1%)
- It can be called by Ford at par value ($50) any time before January 15, 2032.
- On January 15, 2032 it will be redeemed at par value for $50
The current price on FPRS is 52.95. I bought mine at 32.39, giving a yield of 10.03%.
BUT – I bought these preferreds a while ago, back when they weren’t paying anything at all. They kept the dividends in arrears. They did eventually pay, and are paying on a regular basis now. Ford common is at 16.11 right now with zero dividend. It has had a nice runup over the last year (what hasn’t?).
I think Ford’s good choices on the engineering side are being helped by the fact that they didn’t take a bailout. I work with salt of the earth mechanics daily and most of them, oddly, know the fact that Ford didn’t take a bailout. They hold Ford in higher esteem for this.
Nowhere mentioned in the article I read was the haircut the UAW had to take in all of this or the cramdown of Fords bondholders while the company held cash. But that stuff seems like all but a distant memory. For now, the Ford party is on, and in a big way.
*I miss the old “Carl’s hero Alan Mulally” category 🙂
UPDATE 2-11-11, 10.26am – Just got a call from my FA, Ford is calling this at the promised $50! Oh well, time to find another good investment.
UPDATE 2 – 2-11-11 3.12pm – My FA thought we could get a bit more than the $50 in the open market due to shorts covering this position and he was right, we squeezed out $51.18. That is why I pay the man.