net profit margin for 1998 was 9.48%, which is their best return in the last 5 years. Their increasing profit margin means the company is allowing more sales dollars to become profit dollars. The ROA for Ford in 1998 was 5.02%, compared to the industry ROA of 3.1%. This indicates that Ford is making above average use of their assets relative to other auto manufacturers. Although this rate in comparison looks good, it is Ford’s lowest ROA in 4 years. The ROE for Ford in 1998 was at 27.07%. Taking into account the industry’s average of 16.8%, Ford appears to be maintaining a high level of shareholder wealth. The payout ratio measures the percentage of earnings that are paid out as dividends. In 1998, Ford paid out .10 of its earnings to shareholders. This is down from .29 in ’97 and from .41 in’96. Research and Development costs for 1998 and 1997 were $6.3 billion, which was 4.4% and 4.1% of their sales, respectively. These expenditures are a necessary cost for a firm such as Ford. Market DataMarket-value ratios indicate what investors believe the company is worth. Ford’s 1998 price/earnings (P/E) ratio of 12.64, meaning investors are willing to pay $12.64 per each dollar of earnings. This has more than doubled from 1997, a positive signal from investors to Ford management. Market-to-book value for 1998 was 1.74. This is significantly higher than in the previous 5 years. This means that Ford is worth 74% more than stockholders of the past and present have invested. Impact of UnionsUnions play a large role within the Ford Motor Company, employing vast numbers of its workforce. The United Auto Workers (UAW) union represents these employees. From management’s viewpoint, the effects of having the UAW can be both positive and negative. Employees with representation, who reap the benefits of a strong and organized labor union, are more satisfied, and therefore more efficient, employees. ...
