There is a general notion that the best cars in the world are not made by American companies. Japanese Toyota Motor Corporation (ADR) (NYSE:TM) and the German “Big 3” are often seen as superior to their American counterparts. However, examining SEC filings will enlighten you. I don’t know which automaker is the most valuable in the world. But, I’m confident that American automakers are worth more relative to their market value than the majority of overseas competitors.
Which American automaker to choose?
In my eyes, both Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) are cheap right now. They both sport P/E ratios below 10, while at the same time Toyota Motor Corporation (ADR) (NYSE:TM) has a P/E ratio of 47.06! GM has the best margins in the industry, perhaps what attracted Warren Buffet, but Ford Motor Company (NYSE:F) strikes me as a superior company for two reasons. First, during the federal governments bailout of the automotive industry, Ford Motor Company (NYSE:F) received $5.9 billion to modernize some of its plants. On the other hand, the federal government had to invest over $50 billion to bail out GM. Personally, I’d rather own the company that needed less assistance during a crisis. The other concern I have with GM is the instability they have at the CEO position. Over the past 5 years, GM has had 3 different CEOs. At the same time Ford Motor Company (NYSE:F) has had the same man at the helm for the past 6 and a half years. He is one of the most talented CEOs out there in any business. In fact, he’s so talented he deserves a paragraph all to himself
Alan Mulally, an investor’s dream
You can analyze past performance by examining financial statements in a process that’s not all that difficult. On the other hand, predicting the future accurately is impossible. It’s a shame since, as a potential owner, your primary concern is future performance. Fortunately, there are signals that can give you an idea as to what the future holds for a company. One of the surest signs of a bright future is a topnotch CEO, and Ford has that in spades. Having Alan Mulally leading your company provides a sense of security. Before coming to Ford, his talents were employed by Boeing, and boy did that stock soar while he was there! Between 1994, the year Mulally was put in charge of all airplane development activities at Boeing, and September 2006, when he resigned as CEO of Boeing’s commercial airline segment, the stock nearly quadrupled. He achieved this kind of success by running a tight ship. Tales of executive frugality, in situations that do not affect customers, are always a good sign. During the hearings for government loans in Washington, he was initially rebuked in the press for traveling to the hearing in a corporate jet. Not one to waste the shareholders money, Mulally drove to the next hearing in a Ford brand hybrid all the way from Detroit. Additionally, he sold all but one of the company’s corporate jets. Ford is led by a man with an astounding track record who prioritizes increasing shareholder value over a fancy jet that only benefits executives.