There’s nothing I love more than a good, old-fashioned, American company success story…especially since they are so are to come by these days.
Yesterday, Ford Motor Co. (NYSE/F), the number two U.S. automaker, announced that it was reinstating its dividend payments for the first time since 2006. Ford, as you may recall, was the only major car company that did not go toWashington asking for a bailout during the credit crisis.
It’s been 10 consecutive quarters of profits for Ford, now the financially strongest of the three major American car companies; strong enough to start dividend payments again.
What made the difference? What made Ford a success while the other two major car makers needed to go through bankruptcy to survive? What made Ford reinstate that dividend payment earlier than expected? Three reasons:
While 80% to 90% of businesses fail or are sold when the second generation takes over, Bill Ford is still the chairman at Ford Motor Co., a rarity that makes Ford more of a family business. The Ford family has a big interest in getting >dividend payments going again. You can’t relate one individual person or family to either General Motors Co. (NYSE/GM) or Chrysler.
Secondly, leadership at Ford was strong. Alan Mulally, Ford’s CEO, steered Ford through some very turbulent times. He cut dividend payments when he needed to (September 2006). He raised cash prior to the 2008/2009 recession, anticipating the difficult times ahead. He was proactive. In business today, you need to be proactive, not reactive.
Finally, by not going to Washington and asking for bailout, Ford established itself as a smart and financially strong operator. Consumers want to buy from smart, strong companies.
In an era of very stiff competition in every American industry, the Ford story is truly inspiring. It’s an example of how a business should be run and how a company can turn around and give profits back to their patient shareholders via regular >dividend payments.
To give you an idea of how well Ford is doing: for the first nine months of 2011, Ford reported net income of $6.6 billion on about $95.0 billion in sales. The company sits with a hoard of about $20.0 billion of cash on hand. Ford is well positioned to benefit from a continued turnaround of the U.S. economy.