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Ford's Investment Rating Downgraded

Hack

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Completely idiotic to think that a slight change in steel prices will have a significant impact on the profitability of an automaker. Ford's biggest seller doesn't even have a steel body anymore. And the total amount of steel in a car as a raw material can't cost more than a few hundred dollars. The costs in manufactured products are mostly in manufacturing, not in raw materials.
 

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Completely idiotic to think that a slight change in steel prices will have a significant impact on the profitability of an automaker. Ford's biggest seller doesn't even have a steel body anymore. And the total amount of steel in a car as a raw material can't cost more than a few hundred dollars. The costs in manufactured products are mostly in manufacturing, not in raw materials.
Completely idiotic to think the price of raw materials is the only issue. The tariffs don't only cover raw steel, but even finished steel components (like valve piece blanks for our injectors). But all that aside, you are completely wrong about the costs of manufacturing. 47% of the cost of manufacturing a car goes to raw material. Aluminum and steel are the two most prevalent materials. Actual assembly costs are getting cheaper, as most lines today are automated. Raw material and development are the two places where all the money goes up front, then assembly ends around 20% (vs 47% in raw material).
 

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Just for the math people, margins are usually 10-15% for a car like the Mustang (est). So a base GT with true invoice around $30k, is closer to $25k to manufacture. This is probably exaggerating the margins, but a good start.
$25k car represents $11750 in raw material costs, which is on average 47% steel and 8% aluminum. So $5522.50 in steel and $940 in aluminum. Now, steel prices alone have gone up 39% vs this month last year. That's over $2100 added to raw material cost in the car for steel alone. If your margin is $5-6k per car, you are looking at a loss of about a third of profit due to steel cost increase alone. That hurts.

/enginerd
 

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Just for the math people, margins are usually 10-15% for a car like the Mustang (est). So a base GT with true invoice around $30k, is closer to $25k to manufacture. This is probably exaggerating the margins, but a good start.
$25k car represents $11750 in raw material costs, which is on average 47% steel and 8% aluminum. So $5522.50 in steel and $940 in aluminum. Now, steel prices alone have gone up 39% vs this month last year. That's over $2100 added to raw material cost in the car for steel alone. If your margin is $5-6k per car, you are looking at a loss of about a third of profit due to steel cost increase alone. That hurts.

/enginerd
Sorry your math is only what's being claimed by the auto industry. I've seen estimates of $133 on a $33k vehicle to " a few hundred" from independent trade economists and experts who study the situation using real numbers and supercomputing power. And I saw $35 from a steel industry rep which is as bogus as auto industry numbers.

When you add in the 25% tariff on imported cars, no 1 knows what will happen to the US auto industry.
 

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bootlegger

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Sorry your math is only what's being claimed by the auto industry. I've seen estimates of $133 on a $33k vehicle to " a few hundred" from independent trade economists and experts who study the situation using real numbers and supercomputing power. And I saw $35 from a steel industry rep which is as bogus as auto industry numbers.

When you add in the 25% tariff on imported cars, no 1 knows what will happen to the US auto industry.
Citations needed. I work in the auto industry. It is complete bs that it only costs $133 in steel to build a car. Please stop reading conspiracy crap. The price of steel is set by the market. The tariff money doesn’t go back to the auto industry, so taxing imported cars won’t put money back into ford or GM. Anyway, these countries have hit back with increased tariffs on our exports, so it’s a fail from both sides.
 

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Completely idiotic to think the price of raw materials is the only issue. The tariffs don't only cover raw steel, but even finished steel components (like valve piece blanks for our injectors). But all that aside, you are completely wrong about the costs of manufacturing. 47% of the cost of manufacturing a car goes to raw material. Aluminum and steel are the two most prevalent materials. Actual assembly costs are getting cheaper, as most lines today are automated. Raw material and development are the two places where all the money goes up front, then assembly ends around 20% (vs 47% in raw material).
I don't believe any of your numbers or the conclusions you are drawing from them. I especially don't believe your margin numbers.
 

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I don't believe any of your numbers or the conclusions you are drawing from them. I especially don't believe your margin numbers.
Then prove otherwise. Luxury cars have been calculated and criticized over 17%. So even if 10-15% is off, the numbers aren’t off by a massive factor.
https://www.autoblog.com/2017/03/21/porsche-17250-profit-per-car/

What are we on, the Infowars of car forums? Clearly all the automotive companies in the world are manipulating numbers to hide their profits, cause 15% isn’t already massive enough.
 

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The MSRP costs of a new 2019 EB or GT has already been increased a few $K mid production - there was a big article on the rising costs of vehicles now due to all of the Tariff wars...

Steel and aluminum doesn’t only apply to “sheet goods” used to form a vehicle body - it’s ANYTHING - think about it - fasteners, engine blocks, wheels, brake parts, suspension parts, transmission parts, rear end parts,circuitry, metal cases for PCMs, etc...

I don’t know how come people can’t see that any Vendor contracted by Ford (or insert any other automotive manufacturer in the world here) has to increase their pricing on their parts due to the increase in tariff costs for the RAW material.... it starts with the raw material and is passed down the line... from the workers being paid to getting that raw material, to the transport costs of that material to the manufacturers of parts, from the parts distributor over to the Automotive Manufavturer, etc etc etc.... I mean, that’s VERY LOW LEVEL - take it higher by adding in health care costs, labor costs, etc...

The penalties and increased costs HAVE to be made up somewhere for any business to remain profitable that relies on the raw materials to make their own product - so in the end, all consumers pay for it.

EDIT:
Article on 2019 Mustang price increase:
https://www.google.com/amp/s/www.motor1.com/news/262380/ford-mustang-chevy-camaro-pricing/amp/
 
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Citations needed. I work in the auto industry. It is complete bs that it only costs $133 in steel to build a car. Please stop reading conspiracy crap. The price of steel is set by the market. The tariff money doesn’t go back to the auto industry, so taxing imported cars won’t put money back into ford or GM. Anyway, these countries have hit back with increased tariffs on our exports, so it’s a fail from both sides.
I'm not going to post my resume but if you knew me you'd understand I only care about facts subjected to analytic and academic rigor, not partisan politics.

Here is 1 such analysis by a team of academics from the University of Washington, conclusion $214-
https://faculty.washington.edu/dwhm...bile-costs-materials-choice-and-fuel-economy/

Here is Toyota's North American CEO saying "up to $400"-
http://fortune.com/2018/04/02/toyota-tariffs-increase-car-prices-trade-war-steel-aluminum/
 

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sdiver68

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The penalties and increased costs HAVE to be made up somewhere for any business to remain profitable that relies on the raw materials to make their own product - so in the end, all consumers pay for it.
Nobody is disputing that, only the amount of cost, what are the ramifications, and is it worth it given the overall goals of the tariff. Most manufacturers should have hedged their raw material purchases through futures contracts so effects from rising prices today should NOT have significantly shown up yet. It's easy to scapegoat a policy, not so easy to prove the cause-effect.
 

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I'm not going to post my resume but if you knew me you'd understand I only care about facts subjected to analytic and academic rigor, not partisan politics.

Here is 1 such analysis by a team of academics from the University of Washington, conclusion $214-
https://faculty.washington.edu/dwhm...bile-costs-materials-choice-and-fuel-economy/

Here is Toyota's North American CEO saying "up to $400"-
http://fortune.com/2018/04/02/toyota-tariffs-increase-car-prices-trade-war-steel-aluminum/
That isn't the cost of steel going in, they are estimating an average increase to manufacturing across their whole car lineup. $400 is significant, given that profit margins can range as low as 7%. I never claimed my numbers were exact. Those were estimates based on theoretical margins. The fact still remains, this is hitting the industry hard.
 

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Understood - and here’s the recent article on the mid-production 2019 Mustang price increase:
https://www.google.com/amp/s/www.motor1.com/news/262380/ford-mustang-chevy-camaro-pricing/amp/

So if Auto Manufacturers should have figured out such possible raw material increases in their futures contracts - then they are socking it to the public in advance....
————

I think we are also getting away from the original post topic which would be:

Is buying Ford stock even a worthwhile investment (long term) for those seeking to get in on such stocks that are currently low due to Tariff wars AND what “Wall Street thinks” about any given company’s outlook or performance?

Ford stock has generally always been historically “low” but as said earlier, it’s mainly due to the fact that the Ford Family has always controlled that stock.
 

bootlegger

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Nobody is disputing that, only the amount of cost, what are the ramifications, and is it worth it given the overall goals of the tariff. Most manufacturers should have hedged their raw material purchases through futures contracts so effects from rising prices today should NOT have significantly shown up yet. It's easy to scapegoat a policy, not so easy to prove the cause-effect.
How far ahead do you think suppliers guarantee pricing? The whole auto industry is against this. Do you honestly think hurting one large industry to boost a smaller industry is smart?
 
 




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