Ford Motor Company (F)’s Strengths Make It a Geat Bargain

Threats

1). Continued government support towards European car makers will make Ford’s efforts to reduce costs moot.  If the U.S. bailout seemed unpalatable to most Americans; bailouts, better known as government support in Europe, are a way of life there. What Ford could take years to achieve may be granted by the stroke of a pen to a weaker but more socially relevant competitor.

2). Asian competitors will take back market share.  Japanese car sales in North America rebounded around 27% in 2012, after the Tsunami and supply constraints allowed Ford to take away market share. Barring any other unforeseen events, Toyota and Honda Motor Co Ltd (ADR) (NYSE:HMC) will regain lost ground.

3). Hugely competitive cyclical industry — Price wars in the guise of cheap financing and incentives especially from competitors who are not doing as well, undermine Ford. I don’t expect this threat to disappear any time in the near future.

Investment Recommendation

As we’ve seen in the past several decades for auto companies; its not just about economic cycles, cost cutting and labor relations  —  its about building great products (The Chrysler minivan, Taurus, Camry) recognizing trends (going green like the Prius) fulfilling customer needs (easy navigation, voice recognition), maintaining quality control (Even Toyota was humbled in 2010 in its haste to gain market share) and maintaining its brands.

Ford was the one company that recognized this best, way back in 2006. More importantly, it has walked the talk and executed well — I believe this is just phase two of its resurgence.

Ford’s strengths clearly dominate its weaknesses, and among its peers it is the best equipped to satisfy changing customer needs and deal with a slowing global economy.

The article Ford’s Strengths Make It a Geat Bargain originally appeared on Fool.com and is written by Bobby Shethia.

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