“Right now everybody’s excited about the upcoming General Motors IPO,” Cramer said Wednesday. But “if you like the GM IPO coming at all, then you should be Lady Gaga about Ford—it should leave you speechless.”
Cramer called Ford’s turnaround maybe “the greatest comeback story of a generation” and credited CEO Alan Mulally for its success. The secret to that success? A focus on both the company’s manufacturing and its balance sheet, which left Ford with a slew of top-rated vehicles and a greatly improved credit rating.
Remember, like all the major American auto companies, Ford was on the brink of collapse just two years ago. But unlike GM or Chrysler, Ford passed on government aid and chose to, literally, put itself up by its own bootstraps. Mulally slashed production capacity, trimmed the salaried workforce and delivered the kinds of cars that customers want right now: smaller, more fuel-efficient ones, while moving away from trucks.
The results are apparent. The 2010 Ford Fusion was named Motor Trend Car of the Year. The Ford Fusion Hybrid was named North American Car of the Year. Four models won Strategic Vision awards for quality, and seven others won for safety. At the same time, Ford is outselling its competitors and making more money on each sale. Sales in China and India were up 37% in August, too, and Ford’s business there continues to expand.
Then there’s the balance sheet. On Tuesday, Ford sold $1 billion of debt at a cost that shows the bond market grows increasingly more confident in the company. And Ford believes the two ratings upgrades it received in August, from Fitch and Standard & Poor’s, will be followed by still others in the near future. This is important because it means Ford can borrow at cheaper rates, and that translates into higher margins and profits, and ultimately, higher earnings per share. The company expects to be positive net cash, meaning it holds more cash than debt, by 2011, which would be another sign of strength that further brings down its borrowing costs.
Given this, there’s little question as to why Cramer considers Ford among America’s top manufacturers. And as good as things have been for the company, he thinks they will only get better. That’s why he reiterated his buy call on Ford’s preferred shares on Wednesday. What about the common shares? Thought they are cheap right now, he admitted he has been “a bit more conservative about the stock lately.”
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