Disproving Ford Motor Company (F) Bear Arguments

Thirdly, it’s time to tackle the bear argument about the dwindling cash pile. At first glance it’s right, the cash and cash equivalents did decrease. However, the way it’s argued is incomplete, and nearly irresponsible. Take a look at this graph showing the cash and cash equivalents that the bear argument focused on, as well as marketable securities, which both combine for Ford Motor Company (NYSE:F)’s automotive gross cash.

Numbers from Ford’s 10-K, Liquidity and Capital Resources

Now that it’s put in context in a time frame of recent years, the dwindling cash pile that the bear argument covered – the blue line – doesn’t look so drastic now does it? Not only that, the other parts of the equation that go into gross cash sing a different tune. To put it bluntly, you have to consider marketable securities as cash because they are highly liquid assets that Ford Motor Company (NYSE:F) can count on for unanticipated cash needs. When looking at the whole picture, Ford’s cash levels are fine, and improving.

Another aspect that the bear argument didn’t mention: Ford’s free cash flow has declined over the last three years in part because Ford is investing heavily in China to secure its future growth – cash well spent. Ford Motor Company (NYSE:F) is years behind rival General Motors Company (NYSE:GM) in China and plans to double its market share in the region by 2015 – this move won’t come cheap. As an investor, I would much rather see cash flow decline for worthy reasons than to have the cash sitting there.

Bottom line
Ford isn’t the same company it was 10 years ago, and that’s a good thing. It’s making more popular and valuable vehicles today, and is in much better financial condition. It didn’t take a government bailout to turn the ship around; rather, Ford did so with private loans which it has since paid off. When Europe stops bleeding cash and China’s investments come to fruition, look for Ford Motor Company (NYSE:F) stock to be a winner in the automotive industry – if it isn’t already.

The article Disproving Ford Bear Arguments originally appeared on Fool.com.

Fool contributor Daniel Miller owns shares of Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.

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