BetterTrades Blog

Ford Motor Co. (F) made headlines during the third week in October, as the automaker reached a tentative deal with the United Automobile Workers (UAW) and issued a massive recall that only adds to the company’s previous voluntary recall involving faulty switches.

The company’s agreement with the UAW was seen as a step in the right direction for the two feuding sides. The UAW’s National Ford Council backed the proposed deal and is now sending the vote to the more than 41,000 autoworkers throughout the country. The vote is expected to take place within the next several weeks.

The deal, which is expected to expire in 2011, will grant workers a $1,000 bonus if they approve of the agreement and guarantees new vehicle production at five assembly plants.

Ford, on the other hand, stipulated provisions within the contract that puts a six-year freeze on entry-level wages of $14 per hour, increased the responsibilities of skilled-trade employees, which placed more accountability for more than just one job on the worker, and banned any possible strikes related to company wages or benefits.

UAW President, Ron Gettelfinger remarked that the tentative deal would provide job security to current Ford employees. “There is a lot of product commitment here that’s secured, both prior commitments secured from 2007 and additional products, some of which we can’t disclose,” added Gettelfinger.

“Ford has twice as much debt on their balance sheet as G.M.,” Gettelfinger commented. “We want Ford to be successful. We want them to have a profitable quarter and we want them to gain market share. That is job security for us.”

Ford stated that concessions from the UAW were needed to maintain its current footing within the industry. Autoworkers had first agreed to a new contract back in 2007, concerning how the company funded its union retiree healthcare trust, which saved Ford upwards of $500 million a year.

With the 2007 contract yet to be fulfilled, the UAW agreed to make an unprecedented “mid-contract” concession as a direct result of the floundering auto industry amidst the country’s severe economic downturn.

Ford remains the only Detroit automaker to report any semblance of a profit throughout 2009 and is the only U.S. automaker not to accept any financial assistance from the U.S. government. During the 2^nd quarter of 2009, Ford posted a profit of $2.3 billion, bolstered by the company’s intensive cost-cutting measures in which Ford paid down debt by more than $10 billion, thereby reducing the company’s interest payments.

Adverse to the company’s positive union proposal, Ford announced on the same day that they were recalling 4.5 million vehicles that had a defective cruise control switches that could lead to possible fires. The recent recall propels Ford’s total recall of malfunctioning switches to more than 14 million registered vehicles within the past 10 years.

Ford’s recall involves 1.1 million Windstar minivans with the remaining 3.4 million vehicles concerning various Ford, Lincoln and Mercury models. All of the vehicles included in the recall were manufactured between 1992 and 2003.

Wes Sherwood, a representative of Ford Motor Co., released a statement concerning the recall, “We determined with the government that there is a low risk of fires for those vehicles. The other 3.4 million vehicles are the remaining vehicles that have the Texas Instrument switch, so we’re recalling them to reassure customers and prevent future recalls.”

Investigators with the National Highway Transportation Safety Agency (NHTSA) calculated that the Texas Instruments’ switch could potentially leak internally, overheat and thus ignite. The NHTSA also reviewed four separate reports involving the same switch in conjunction with leaking brake fluid that would lead to damage in the vehicle’s antilock brakes, resulting in a fire.

Ford discontinued the use of the Texas Instruments switch in 2003.

NHTSA stated, “Ford drivers should look for warnings of possible imminent fires, including malfunctioning cruise control systems and brake lights and antilock braking system and brake light warnings on the dashboard. If there is difficulty in getting the vehicle out of the park mode should be treated as a warning as well.”

Ford’s recall includes the 1995-2003 Windstars, 2000-2003 Excursion diesels, 1993-1997, 1999-2003 F-Super Duty diesels, 1992-2003 Econolines, 1995-2002 Explorers, Mercury Mountaineers, 1995-1997 and 2001-2003 Rangers, and 1994 F35 Motorhomes. The safety recall is set to commence around October 25.

These two events come on the heels of Ford’s remarkable sales totals in China during the 3^rd quarter. During the period, Ford’s sales throughout the country surged 79% and nine-month growth in sales came in up 43% from the start of 2009.

Within the quarter, Ford sold a reported 119,338 vehicles, with nearly 317,000 sold during the January-September period, up 32% from the same period a year ago. Ford recently broke ground on a $490 million plant in China in September, making it the third plant within the country.

The leaves are changing and there’s a chill in the air. That means football, specifically professional football, and the NFL dominates the landscape each Sunday afternoon throughout the United States. Because of the sport’s popularity, the NFL has no trouble finding companies to advertise on their weekly broadcasts. That’s due to the fact that the sport continues to draw viewers to the television set on Sunday afternoons, sometimes enticing fans to watch games that begin at 1 p.m., 4:30 p.m. and 8 p.m. It’s a long time to engage viewers and an unequalled opportunity for advertisers.

Companies spent $2.616 billion on television advertising for NFL games during the 2008 season, which includes the playoffs and the Super Bowl. The advertisements are dominated by automobile and truck companies, as well as those for adult beverages. These commercials must be effective when purchased to run during NFL programming, since no one is really backing away from the trophy.

Here’s a look at some of the top advertisers and how they company’s stock has moved over the first month of the NFL season. Is it a trend or just coincidence? Decide for yourself.

Anheuser-Busch InBev is the largest advertiser on the broadcasts, spending $134.1 million. The company resumed trading on the NYSE in September for the first time since the merger 10 months earlier. It’s too early to see a trend, with BUD trading at a high of $47.91 and a low of $44.71.  (The company will continue to trade on the Euronext Brussels exchange under the ABI symbol.)

MillerCoors, a merger of SABMiller and Molson Coors, spent $88.2 million last year. Molson Coors (TAP) shares have moved up since the season started, moving from $46.88 to a high of $49.88 and ending September at $48.68.  SABMiller trades on the London Stock Exchange and ranged from L 140 to a high of $153.5 and closed at $150.9.

The U.S. Government spent $127.1 million on the NFL last year, but that isn’t just for military recruiting ads. That figure now includes the cost of ads purchased by General Motors, which the government now controls. GM stock is no longer being sold.

Other automotive companies are still investing. Toyota spent $107.8 million and Ford spent $101.7 million, with the Chrysler brands spending $63.7 million. Since Sept. 1, Toyota stock has declined from $86.30 to a close of $78.57 at the end of the month, while Ford shares remained in a shallow trading range from $7.77 to $6.75, closing at $7.21 on Sept. 30. Chrysler is a privately held company and does not trade on the exchanges.

Can you hear me now? Telecommunications also remains a big spender. Sprint Nextel pumped $82.1 million, Verizon spent $64.2 million, and AT&T spent $64 million. That will buy a lot of rollover minutes, but didn’t really have an impact on the stock. Sprint (S) traded in a range from $3.53 to $4.14 during the month, closing at $3.95. Verizon opened the month at $30.37 and finished the month at $30.27, although it channeled higher ($31.35) and lower ($30.58).  AT&T moved the most, going from $25.89 to $26.99.

Southwest Airlines continues to be the nation’s leading source of budget air transportation. Southwest put $66.2 into NFL advertising in 2008 and gave viewers the freedom to move around the country. Southwest (LUV) stock moved higher to start the month like a quarterback against a porous defense, going from $7.86 to $10.13 before settling down in the $9.60 range. But, to be honest, credit for the increase probably should go more to the fact that oil prices lessened a bit early in the month.

Yum Brands spent $51.5 million with the NFL in an effort to drive viewers to Kentucky Fried Chicken, Pizza Hut, Taco Bell and Long John Silver’s. Yum has been in a slight downtrend, but has held pretty tough, ranging from $33.72 to open the month and closing at $33.76 to end the month.

There are many other regular advisers on NFL broadcasts that are seen on a weekly basis. Who can forget those clever Burger King ads with Darius Rucker? Who can forget those Campbell Chunky Soup ads, even though we’d certainly like to try? And with professional football, Visa is the credit card or debit card of choice since it takes you everywhere you want to be.

Don’t look for the trend to change. People continue to watch NFL football and the sport shows no signal of losing its stranglehold on the American public. In fact, this fall the league is taking a regular-season game to London and it has long been rumored that the NFL might eventually place a franchise in England and place the game on an international stage.

And while a game’s popularity may draw advertisers, who seek to hit their target audience, it doesn’t necessarily show up with bigger results on Wall Street. So it’s probably a good idea to enjoy the game, support your favorite team and patronize the sponsors. But when it comes to your stock portfolio, don’t make a purchase just because they’re affiliated with the NFL. You’ll probably end up disappointed.

Major indices climbed roughly 2.4% last week, putting several significant technical resistance points in the rear-view mirror in the process.

After struggling with 1,007 on the S&P for several sessions, stocks have been rallying in the face of a shadowy rumbling by bears that the run has to run out of breath sooner or later. September, traditionally the worst month for Wall Street, has not ushered in any cold winds that would hint of a cold season brewing for stocks.

Since bottoming out in mid-March, bulls have had a mostly uninterrupted path to gains. Year-to-date, the tech-heavy NASDAQ is up a gaudy 35%, while the S&P and Dow have risen 18.2% and 11.8%, respectively.  The CBOE Volatility Index, which gives a broad measure of market volatility and is commonly referred to as the VIX, has plunged 40.1% since January 1.

The growth of technical traders has raised the importance of support and resistance markets in determining market direction. When a security or index breaks through a support a resistance level, analysts interpret the event as the beginning of a new trend.

Blue chips rallied to 9,820 on Friday, putting them within shouting distance of the technically important 10,000 mark. In recent days, we’ve seen other asset classes -like Comex gold futures rising above $1,000 per troy oz – break right through perceived resistance as investors buy into securities of all types. Is this the week that the market breaks above 10,000 or will bears finally put their foot down?

Several blue chips received influential upgrades on Friday, helping push the Dow 30 closer back toward 5 digits. Procter & Gamble (PG) scored a “Buy” rating from former Dow component Citigroup and energy giant Chevron (CVX) was upped to “Outperform” by Credit Suisse.

If the market is to get to 10,000 this week, it will have to do so on the back of more housing data (existing and new home sales), the durable goods report, and what is likely to be a little-news event in the latest FOMC meeting.

With all the cash flowing into the market from portfolio and money managers, it seems unlikely at this point that 10,000 will faze Wall Street. After the financial collapse that sent the Dow near 6,000 this past winter, the blue chip index is now roughly halfway back to its December 2007 high above 14,000. The battle for 10,000 will be one to watch.