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Ford Motor Company (F), General Motors Company (GM): Which U.S. Automaker Is The Best Investment?

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The auto industry seems to be roaring, with factories operating at 95% capacity in some cases. This has led to an expected influx of new hiring within the industry, according to The Center for Automotive Research, who expects as many as an added 35,000 jobs for the full year of 2013. Vehicle sales could reach over 15.5 million for the year as well.

Two American automakers have been on a roll recently: Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). These two companies are also both great comeback stories in their own right, so how do they stack up in comparison?

Valuations:

P/E Forward P/E Price/Book Dividend (Yield)
F 10.17 8.98 3.31 $0.40 (2.60%)
GM 11.05 7.35 1.68 N/A (N/A)

Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) are trading similarly in regards to their share price relative to earnings, but Ford has the extra advantage of a dividend for investors. This dividend was also recently doubled, and Ford may become a good dividend growth story in the future, especially if the automotive industry sustains its positive momentum.

Looking at balance sheets, both auto-makers are stocked up on cash, but General Motors Company (NYSE:GM) beats out Ford Motor Company (NYSE:F). Ford’s current ratio, however, is more than double GM’s. One thing that sticks out is Ford’s debt to equity ratio. While at first glance it seems like Ford is in trouble, an investor must also consider that unlike General Motors Company (NYSE:GM), Ford has a credit arm in addition to its automotive operations.

Looking closer at the company’s balance sheet, Ford Motor Company (NYSE:F)’s amount of automotive debt at around $15 billion actually looks quite manageable in comparison to their current cash stash of almost $14 billion.

Around $91 billion of their total debt of about $107 billion is due to Ford Motor Company (NYSE:F) Credit, which many see as “good debt.” This is because this credit is generally low-risk, being either accompanied by an asset (a car that can be recovered if the debt isn’t repaid), or being debt lent to Ford automotive, which means that the company is financing itself at wholesale rates.

Ford also appears to have a stronger, more liquid balance sheet than General Motors Company (NYSE:GM), in addition to the strong financing asset it has at its disposal.

While both companies have seen revenues trending upwards, Ford’s earnings look a little better over the last five years as well.

And then there is the “disruptive innovator”

While comparing two of the more traditional car companies, another American auto-maker must also be brought up– Tesla Motors Inc (NASDAQ:TSLA).

Author Adam Hartung sees Tesla as a “classic disruptive innovator” that, while once being scoffed at by traditional auto companies, may have the last laugh.

He points out that Tesla Motors Inc (NASDAQ:TSLA) moved 100% of production and opened its second dealership in 2009 while being laughed off as a joke by GM’s Bob Lutz. Mr. Hartung also points out that while Tesla is truly creating premium all-electric automobiles, Ford and GM are set on being stuck in their old ways, which may spell trouble for them in the future. He also elaborated that even Chevy’s “electric” Volt has a gasoline engine.

He may have a point, especially since Tesla pulled in its very first profit in its most recent quarter. Tesla is also building a network of “supercharging” stations nationwide, with free recharging that takes about an hour. Electric cars are still seen as more inconvenient than traditional cars by the general public, however, so Tesla overthrowing the traditional automobile is far from a certainty, but it is definitely a real possibility in the future– especially if the price of the all-electric car comes down in the future.

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