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Investors Underestimate Growth of Auto Industry

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On: Mon, Nov 15, 2010 at 5:03PM | By: Sherry Christiansen


Investors Underestimate Growth of Auto Industry

Bill Ford, Chairman of Ford Motor Co., reported that he feels investors are not cognizant of the facts surrounding the financial potential of today's auto industry for both domestic and export sales, including China and India. "When people think growth, they think of the Brazil, India, China, Turkey, places like that—which is all true, and we're participating a lot there," according to Ford in an interview  with Reuters. "But we actually think the U.S. is a growth market for us."

Ford Motor Company now holds the number 2 position for domestic automobile sales in the United States market; up 21% in 2010.

"The U.S. is a big growth market for us," said Ford, the great-grandson of the company's founder. "We're growing our market share. We think the sales volumes will continue to grow as an industry, and I don't think people focus on that."

Ford stock is up 3.5%, to over $16.00 per share for the first time since 2004. An analyst with Morgan Stanley has predicted Ford’s stock could nearly double to $30 per share if the sales continue to rise. Ford reported a 19.3% increase in October car and truck sales, which outpaced the industry-wide sales increase of 13.4%, boosting Ford’s gain of 1.5 points of market share.

Morgan Stanley analyst Adam Jonas said the stock could command a higher price target if Ford increased U.S. market share by 2% points to 19%.

According to Jonas: “Yes, we could see a modest US recovery of about 1%. In the last few weeks we saw a slowing down of the decline and a lot of media talk about green shoots.” Jonas also stated, “My predictions are still valid, however, technical recovery is one thing and real recovery is another." The recovery will be a jobless one; some industries will recover faster than the others, and the gross national recovery will not undo the damage anytime soon," said Jonas.

The positive signs of economic recovery are not interpreted as being a result of healthy economic growth, but rather a direct result of government bailouts and stimulus incentives.

According to Bill Ford: "It's an indication of how people are seeing us now and that the plan we've put together is working."




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