“The company, widely regarded as the strongest and best-run U.S. auto maker, is suddenly on the defensive. Ford is suffering from a series of self-inflicted wounds, from embarrassing quality glitches and costly product delays to declining productivity. Those mistakes couldn’t come at a worse time: The economy is slowing, and Ford’s share of the U.S. truck market–its main source of profits–is dwindling.”—Business Week, 6.25.01
Despite the worries outlined in the 2001 Business Week, it’s GM who today became the second major U.S. car manufacturer, after Chrysler, to file for bankruptcy. Ford is the only U.S. auto company to remain relatively healthy. In addition to not requiring government loans, Ford’s sales declines during the last few months were less than GM or Chrysler. Why should this matter to you?
To be clear, this post isn’t a recommendation to buy Ford. Instead, it’s about covers like the one above that place a target on the backs of companies. Both good and bad, these targets can lead you to make assumptions about whether it makes sense for you to invest. Hopefully, Ford will continue to improve its operations during the coming weeks and months so it can avoid the fate of its U.S. competitors. However, as history continues to demonstrate, these covers are not the tool you should use to determine whether its time for you to invest in a particular company.
