Motley Fool Hidden Gems Investing - Motley Fool Money: 03.01.2013

Episode Date: March 1, 2013

Groupon CEO Andrew Mason calls it quits. Nevada and New Jersey legalize online gambling.  And Priceline bucks the trend in Europe.  Our analysts discuss those stories and journalist Bryce Hoffman talks about the future of Ford. Learn more about your ad choices. Visit megaphone.fm/adchoices

everybody needs money that's why they call it money from fool global headquarters this is motley fool money welcome to motley fool money thanks for being here i'm your host chris l joining me in studio this week for motley fool one jason moser and for motley fool's million dollar portfolio charlie travers and ron gross good to see you guys. We've got retail stocks, we've got gaming stocks, we've got the 25 best companies in America. We'll talk about the future of Ford Motor and the automotive industry with bestselling author Bryce Hoffman. And as always, we've got a few stocks on our radar, but we're going to begin this week with Groupon. Shares were down more than 20%

on Thursday after terrible fourth quarter results, but they bounced back Friday morning after CEO and founder Andrew Mason was fired late on Thursday, and Jason, Andrew Mason said as much in his farewell letter, he had to go. Yeah, that was a good farewell letter. I mean, I think it was probably the most effective communication we've seen from him thus far. And included a joke. You don't usually get a joke in a resignation letter. He really showed his true colors there, some humility and a good sense of humor. But I mean, this is something that obviously needed to happen. I don't think it's a surprise that

it happened, especially given their core. But I would also warn investors to please not be fooled into thinking that just a leadership change makes everything all better here, because you still have the same underlying problem in a company with really no distinct competitive advantages in an industry that has virtually no barriers to entry. And so, the leadership change is one change of probably many that they're getting ready to put forth here. And I think this is just the beginning of it. Yeah. And Charlie, speaking of the underlying business, I mean, just to go back to those fourth quarter results, they lost $81 million. They forecast flat sales. Margins are shrinking. Cash flow is declining. I mean,

is there any- But it rhymes with coupon. It does rhyme with coupon. That might have been the best move they ever made. I was waiting for a bright spot out of you there. I was actually going to turn it over to you for any silver lining in this business. Ray of sunshine. I think that they do have a well-known name and brand. I do think they have a large number of users, but I think they need to tweak the business model a little bit. The economics of these deals

are not that great for merchants. There tends not to be a lot of repeat use because of that. If you have a restaurant and you're selling your dinner at half off and you only get to keep half of that money, that's a losing proposition unless you get to keep those customers who tried you for the first time coming back for more. So maybe they can introduce some loyalty elements to get that kind of repeat business. But something's got to change, other than just the CEO. What do you think, Ron? I think the IPO was a real shame. It left a lot of people holding the bag. It went public, I'm sure at the time, we were all over it.

Market cap of $16.5 billion when they went public, and now it's around $3 billion. Right. In a sense, you can't fault the company for trying to get the best valuation they can in the marketplace, but with the weird metrics that they originally put forth that didn't include those marketing expenses, all that kind of stuff. It really was just a shame. It's the kind of case where the IPO markets really don't work for the individual investor, and that's why everyone really should be careful about what they're buying if they're kind of lucky enough, in quotes, to get in on IPOs. And it's not terribly surprising that they have not been successful thus far. I mean,

you can look at Amazon's quarterly reports, and they continue to write off this Living social investment. They recorded a $650 million loss here for 2012. So, it's just not the most lucrative, defendable business model in the world. Now, with that said, Charlie, I think, said a very important word here in loyalty. And I think, let's try to come up with some ideas of how Groupon can get better. And I think one of the keys there is to try to figure out a way to develop a more loyal following, sort of a stickier consumer base. And I think it would be important for them to be able to partner up with someone in some regard, whether it's a Visa or a MasterCard or an American Express. And we've talked before about American Express and their deal with

Twitter. And I think that's a great example of just something that Groupon could pursue in order to create a little bit more of a loyal customer base, keep people coming back for more. This week, New Jersey became the biggest state yet to allow regulated online gambling. The new law signed by Governor Christie allows casinos in Atlantic City to run websites that take bets on poker, blackjack, and slots. Ron, last week it was Nevada passing this kind of law, this week it's New Jersey. It kind of seems like one of those situations where the dominoes are just going to start falling in terms of the states. And we saw

stocks rising sort of across the board, not just the casino stocks, but even Zynga was popping on this news. I think this was inevitable. It was going to be the next iteration of gambling. It had to happen at some point. The major holdup was the Department of Justice, which starting really in 2011, began to signal that they were going to lighten up on this. There's still a lot of hurdles on a state-by-state basis. Gambling still has a stigma that is negative to many folks. But it's coming, and it is definitely the future of gambling.

And there's going to be a lot of winners, whether it's the technology companies, the social gaming companies, the casinos themselves, even the Indian tribes that run these casinos in a lot of jurisdictions. A lot of people are going to benefit. it. And the 15% tax that New Jersey is going to collect on all this additional revenue doesn't hurt either. But are some companies in better positions than others? Because just on the face of it, it would seem like it would be the casinos themselves, because they already have the apparatus in-house to deal with state regulators. And that is a whole side of the business that

obviously isn't glamorous and doesn't really make them any money, per se. But that's among the most crucial part of the business. And if you're Zynga, yes, you have the opportunity to now go into gaming stocks, but you now all of a sudden have to build from the ground up a state regulator department within your business. Well, I want to say yes. I think you're exactly right. The casinos have the infrastructure in place to get this done. Now, Zynga does have, for example, 15 million online poker players right now that are not gambling. It's games. You can probably convert a significant amount of those people to be actual gamblers. But again, you're correct when it comes to the regulatory issues. And Charlie, you're the best poker player in the room. I turn

to you. With some of the scandals that have come around with the poker gaming sites, I agree with Ron that the casinos are the winner because it's not just the infrastructure and dealing with the regulators. It's a matter of trust that the site is not going to steal your money. It's a matter of trust that the game you're playing is actually fair. The odds are still stacked against you, by the way, but at least it's fairly against you and they're not cheating. So I think the casinos are the winner here. Best Buy's fourth quarter loss came in lower than expected and shares were up a little bit Friday morning as a result of that. Charlie, one of the narratives we've seen playing out over the last few months is Richard Schultz, the founder of Best Buy,

really trying to take the company private, looking to line up the financing to do that. And separate from the quarterly results was the news that Best Buy rejected his latest offer, which was just a $1 billion investment. When you look at Best Buy, what leaps out at you? Sure, Chris. Right. So last August, Schultz proposed acquiring the company for $24 to $26 a share. It's at $16 right now. The deadline for his- Take it. Take the money. Take the money if it happened. And he does own 20% of the stock. But the deadline to buy the entire company did pass without an offer, and the suspicions are that he couldn't get the financing.

But if you look at the company's operations for the year, revenue was flat. Their comps were down a little over 1%, which actually isn't that bad considering the business they're in and who their competitors are. And the domestic was stronger than the international. They mentioned that Canada and China were weak. So there are some bright spots for Best Buy. Online could be very interesting for them. They're seeing double-digit growth in computing and mobile phones, which are no doubt what people are buying these days. And what's bad is consumer electronics and entertainment.

They face a lot of competition, not just from Amazon, but from Walmart and Target. Just, you know, cutthroat pricing there. So I think all in all, Best Buy is actually still making money. And, you know, it's not all doom and gloom. I think there are some bright spots in this report. Jason, I have to believe that some of their locations are much more profitable than others. Is the path forward for a company like Best Buy just to get smaller as quickly as possible, to really focus on the ones that are more profitable?

I think it's going to have to do that. I mean, certainly, I'd be very concerned if they were opening new stores. I mean, what we're going to see probably for the foreseeable future here is some serious gross margin pressure, because with the price matching initiative, they're not going to really have any choice but to go ahead and sacrifice profitability just to keep their head in the game here, really. But, yeah, I mean, focusing on the more profitable stores, and I think they're just going to really slim down the operations. It's kind of – they're sort of – you're seeing Radio Shack kind of fall off the world here. Best Buy is going to sort of probably squeeze in there, take some of that space with the mobile phone business. The problem is that's not the most lucrative business either. So, you know, I think the other thing they really need to focus on is the online initiative. The more they can devote towards internet sales, trying to do something a la Amazon, you know, the better chance they have of staying in longer. But I think profitability is going to be really hard to come by for them.

I'd like to see them differentiate themselves by the service aspect on the showroom floor. So if you want cheap, you can go to different places. But if you want some advice and to really know what you're buying, you go to Best Buy. They're just not getting that done. It's a disaster in terms of the sales staff. But if you look at their marketing, I mean, their latest commercials with Amy Poehler, where one of the key messages, I mean, the overall theme is one of customer service, but one of the key messages is, hey, we don't make money on commission. We're just here to help you make the right choice. It seems like maybe they might benefit.

I mean, we've talked about that before, the service aspect. Make it something that you can't get online, something that Amazon can't specialize in, for example. or the service side of it, if they whittled it down and almost became like a consulting business to some degree, where if you're looking for someone to help you in installing an entertainment space in your home or whatever it may be, I mean, a resource to contact and to talk with and to get some ideas from, that might be something. And they do have that on the tech side with their geek squad. You know, somebody who's local who can actually sit down with you face to face, whereas you're

calling some random stranger around the world is appealing. H.H. Gregg actually does a good job with their sales staff. That's the name of the company? H.H. Gregg, yeah. Yeah, so I don't know if two of those are needed in the world. Probably not. But maybe taking a page from their notebook would be a good idea. Shares of JCPenney down more than 20% this week after fourth quarter results.

And, Ron, obviously there are a lot of numbers on the table. The one that leaped out at me was the fact that same-store sales were down a whopping 32%. I don't know if I've ever heard of same-store sales being down so poorly. Ron Johnson, so far, is not getting it done. Now, to give him some credit, he did say this was going to be a multi-year process. He was right. He was completely right. It appears it is not going well, though.

The boutique concept, creating dozens and dozens of boutiques within JCPenney and taking the sales, promotional, couponing away, doesn't seem to be what the core customer wants. So he is admitting that. He's getting back to the sales. He's going to start running weekly sales. There will be promotions and coupons. So that's good, but I'm just not sure in this competitive environment. Retail is a tough business if JCPenney can turn it. Well, similar to Best Buy, when you look at the fact that they have 1,100 stores, they have 160,000 employees, isn't getting smaller as quickly as possible,

isn't that part of the solution? I definitely think that's the case. You probably take your most profitable stores, maybe your top quarter, top half. You get rid of the rest. I think you can have some of that boutique concept still in the store, but also offer some sale merchandise to the core customer. Maybe you can compete and be profitable under that scenario. The balance sheet's not strong.

They're CCC+, that's triple C plus to you and me, credit rating the lowest tier of junk. And so the balance sheet is not necessarily there for them to get this done. And I don't know how they're going to access capital. So they're in trouble. You know, so we've been following the story for almost a year now. And if I go back to their Q2 call, that was supposed to be the bottom. And they said up front, it's going to get worse before it gets better.

We're not seeing signs that it's getting better. I think it's actually getting worse. And it seems like each quarter that comes on, they're like, oh, we tried this. It didn't work. And we're going to try this new pricing strategy or merchandising strategy. and it just seems like they're throwing a lot of stuff at the wall and nothing's sticking. Ron Johnson may still have some time left because Pershing Capital, Bill Ackman's company, and Vernado Realty own 40% of the company, and they're still sticking with him and understand

the multi-year concept, but they'll turn out a dime. They're in this for a profit. Coming up, we've got the battle of home improvement stocks and the 25 best companies in America. Stay right here. You're listening to Motley Fool Money. hey it's chris here is your business protected from data loss if not join the 80 000 businesses who trust mozy to protect their important information mozy automatically backs up your critical files to world-class data centers with maximum security it's easy to use and costs up to 80 less than other solutions learn more at mozy.com that's m-o-z-y.com mozy it's always there As always, people on the program may have interest in the stocks they talk about,

and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Charlie Travers, and Ron Gross. Programming note, next week, Motley Fool Money will be recorded live at the Kogod School of Business at American University in Washington, D.C. We're doing a taping on Thursday night, and if you are in the D.C. area and would like to attend, drop us a note, radio at fool.com. That is Thursday, March 7th at the

Kogod School of Business at American University. Two home improvement stocks reporting this week. Lowe's fourth quarter earnings came in better than expected, but the guidance for 2013 was disappointing. Home Depot, fourth quarter profits came in higher than expected. So, Jason, not a big surprise. Home Depot shares doing a little bit better than Lowe's this week. Yeah, I think Home Depot was the winner of the two. They were decent quarters. Lowe's was a little bit less stellar, so to speak. But I do think that these are both good signs that there is some traction, at least in housing. Consumers are getting back out there and buying. The one thing I like about Home Depot and Lowe's, these are two great ways, I think, to play the housing rebound, so to speak,

because they're not so levered just to whether housing is good or bad, you know, because they can still benefit from the renters and they can benefit from, you know, people buying homes as well, new home construction. There's always something to get at Home Depot or Lowe's and always something to do. I like Home Depot better in this case. It's bigger. They're able to bring a lot more of the cost savings down to the bottom line. It's a more profitable operation than Lowe's. And certainly, the raise in the dividend and the $17 billion stock buyback show that they are very optimistic of their future as well. Shares of Priceline up this week after fourth quarter earnings came in higher than expected. Charlie, revenue up 20%. This company

is just crushing it. Yeah, they sure are, Chris. Bookings were up 31% to $28 billion. That's just a huge number. That's people buying hotels, flights, and rental cars through their websites. Earnings per share were up 34%, and they're guiding for another year of 30% growth in 2013. Some of the bright spots for them is the growth in Asian and Latin America. Their core market is Europe, just to put that in perspective, through their bookings.com websites. They just have a huge network of hundreds of thousands of hotels that you can go to their website and get a great deal on. For the past several months, we've been compiling data and analyzing more than 1,700 public companies to come up with our list of the 25 best companies in America. And when I say we,

we haven't been doing it. I got to give a shout out to our managing editor at Fool.com, Brian Richards, and the whole team that worked on this, John Reeves, Alon Moskovitz, Anand Chakravallu, Dari Fitzgerald, and Chris Weisscarver, basically weighing how companies treat all of their stakeholders, and coming up with a list of the 25 best. So, working off of that list, what's a stock that's on your radar, Ron? Unlike two retailers we discussed earlier, Best Buy and JCPenney, Nordstrom's knows how to do retail, and it's a fantastic company. Relatively high-end, but great, great customer service. They pay their workers, on average, 60% more than the average retailer.

profit margins than Macy's and Saks. So, they do a really wonderful job. Only about 240 stores. So, they know how to do it right, unlike, we said, JCPenney with more than 1,000 stores. So, it's just a wonderful company. Not screamingly cheap, but also not very expensive. Just kind of where you think it would be. And the ticker symbol? You know, I'm drawing a blank, gentlemen. What is the ticker symbol at Nordstrom's? It's the initials. The ticker S is an N-O-R-D.

No, no. It's J-W-N, I think. That is correct. It is J-W-N. J-W-N. I get a point for that. Charlie Travers, what's your stock off the list? I'm going with Google, Chris. It is just one of the most innovative companies in America. And it's not just that they come up with great things like Gmail and search.

It's that they make it easy for their consumers to use, really breaking down a lot of the barriers that can be intimidating about tech. And I think that's one of the reasons they're so successful. And the ticker? G-O-O-G. See, Charlie knew the ticker. Oh, yeah, sorry. Jason? I know my ticker, too.

It's Under Armour, number 10 on this list. Ticker is U-A. But, you know, this is Kevin Plank's business, and that's one of the reasons why I like it so much. He's certainly married to its success. Big competitor is Nike there, but Under Armour's doing a really good job keeping inventory under control, and they're witnessing some gross margin pressure there. But I do think that it's a long-term growth story. The stock is not cheap today, but I think that it's definitely one worth keeping on the short list.

Under Armour's No. 10 on the list. Google is No. 4 on the list. Nordstrom is No. 17 on the list. But if you want to check out the entire list, go to fool25.com. That's F-O-O-L-2-5.com. It's our list of the 25 best companies in America. Ron Gross, Charlie Travers, Jason Moser. Guys, thanks for being here.

We'll see you next week at American Universe. Cannot wait. Thanks, Chris. You're the best around. Nothing's going to ever keep you down. You're the best around. Nothing's going to ever keep you down. Coming up, a conversation with best-selling author Bryce Hoffman on the turnaround of Ford Motor

and the future of alternative energy cars. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. When Bryce Hoffman first started covering the Ford Motor Company for the Detroit News back in 2005, the automaker was on shaky ground. Today, Ford is on solid footing, thanks in no small part to the leadership of CEO Alan Mulally. It is a story captured in Hoffman's best-selling book, American Icon, Alan Mulally and the Fight to Save Ford Motor Company. Bryce, thanks for being here. Hey, thanks for having me, Chris. So, Alan Mulally goes to Ford in 2006 after a long, successful career at Boeing.

How bad were things at Ford when he got there, and what are a couple of the big things that he did to turn things around? Well, you know, Chris, things were very bad, and they were a lot worse than I think anyone on Wall Street or anyone outside the company realized. One of the things that I learned when I was researching this book was that they had already begun planning for bankruptcy when Allen was brought in in 2006. And, you know, it was a company that had really exercised all of its options. You know, they were running out of road and they were burning through cash.

You know, fortuitously, before he even showed up, Bill Ford and then-CFO Don LeClaire had begun putting together this massive financing package that would become what Alan likes to call the biggest home improvement loan in history, borrowing $23 billion just before the global credit markets slammed shut their doors. and that was very fortuitous, obviously, for the company. And it let Allen pay for really a top-to-bottom transformation of the company. You know, new products, new ways of building cars, but really more important than that was a new culture, a culture that was based on teamwork, on working together, and that was something that was really new for Ford

because this was a company that had really been at war with itself for decades. You know, CEO transitions are tough to pull off under the best of circumstances. This seems like it may have been among the worst of circumstances. What in particular did Mulally do to change the corporate culture? Because it seems like when a new CEO comes in, whatever the industry, that culture is among the toughest things to make a significant improvement on. I think you're absolutely right, Chris. I mean, this is something that companies struggle with in every industry.

And I mean, I get calls all the time from companies who want to know how Ford did this and how they can use it in their companies. You know, changing culture is something that only happens, I think, and I think that Alan demonstrated this, only happens by having a leader that is really committed to walking the walk, you know, not just talking the talk. Alan came in, a lot of people thought, you know, he's just going to fire everybody. he's going to bring his own people in. You know, people were putting their resumes together. Quite the opposite. He told everyone, look, you know, I think Ford has the talent that it needs

to save itself, but you've got to stop fighting with each other and work together. This was a company, you know, with some of the most sharp elbow boardroom politics you can imagine, Chris. I mean, you know, there were decisions that were made right up until 2006 when he was brought on, you know, where people would make decisions about future products to help their region and undermine other regions of the company. I mean, that's how bad it was. So how did he overcome that? He overcame it by making an environment where everybody would discuss the company's problems together every week in a kind of, you know, safe zone. No one was allowed to criticize anyone else. No one was allowed to blame anyone else. It was just a dispassionate

look at the data. And that really kind of allowed the company to kind of overcome these personal politics and focus on the fundamentals of the business. You know, Alan Mulally, and I obviously don't know the guy, I interviewed him a couple of years ago, but all the reports I see, all the coverage, he seems like he is, on many levels, a genuinely nice guy. But I can't imagine you get to be the CEO of Ford Motor Company. I can't imagine you get to that level of business success without being tough. So my question is, what does the Alan Mulally brand of toughness look like? How does he wield power within Ford Motor Company? You know, Chris, that's an excellent question. And it's a question that we asked him very soon

after he came to the company because, you know, as you know, he's very ebullient, you know, kind of an aw shucks guy. And we asked him, you know, where's the toughness? And believe me, he is the proverbial iron fist in the velvet glove. He'll smile at you. He'll pat you on the back. But if you don't deliver on your commitments, he will hold you accountable. And that was new for Ford. This is an industry that was based on excuses, that was based on blaming other people. And Alan, you know, would take these executives and say, you know, why is this going wrong in your division? And if they didn't have an answer, he'd just smile at them and say, well, I know you'll have it for me next week. And pat them on the back.

But there was a firmness that they knew that if they didn't have the answer, that they were going to be just withering under that stair. And it really comes down, like I said, Chris, to accountability. holding people responsible for executing their part of the plan. Alan Mulally is staying on as CEO through 2014, and the odds-on favorite to succeed him is Mark Fields, who's the chief operating officer. What is Mark Fields' leadership style like, and to what extent do you think he's going to be able to maintain this new and improved culture? Chris, I've known Mark for a long time. Before Alan's name was even mentioned here, I was working with covering Mark

when he was president of Ford's Americas Group, which was the company's largest division. Mark today is really a product of Alan's cultural transformation. He's a guy who was the first person on the team to really get with the program. There's a story that I tell in the book that I think is really illustrative of how how alan's process works and and every week you know he would he would ask the executives to to give a five minute update on their part of the company and color code it all the data points would either be green if they were on plan red if they were off plan or yellow if there was a question about them and for the first few weeks all of these these slideshows were green and

Finally, Alan just stopped one of the meetings in the middle of the meeting and said, Hey, guys, we're about to lose $14 billion. Is there nothing going wrong at this company? How do you explain it? The next week, Chris, Mark was preparing his slide deck. And this was in December of 2006. They were getting ready to launch the new Ford Edge, brand new vehicle. And Mark knew that there was a problem that had been discovered at the last minute

by some of the test drivers at the factory, and it hadn't been diagnosed yet, some sort of rattle in the back. And it was the end of the year. This was the type of thing that would normally just be brushed under the carpet because people would be anxious to close the year out, get their bonuses, you know. No one would want to have to get called on the carpet for something like this at the end of the year. But he decided, you know what, I'm probably going to lose my job anyways,

so I'm going to see if this guy's for real. And he put it in red. And the next Thursday, Mark gets up and is giving his presentation. He gets to the product update slide, and he says, and as you can see here, everybody, we have a problem with the Edge launch. It's in red. Here's what it is. The entire room just fell silent, Chris. And I talked with every executive that was in that room,

and they all told me the same thing. They thought Mark Fields just fired himself from Ford Motor Company. and then all of a sudden they heard someone start clapping and everyone turned around and it was alan and he just kept clapping and clapping and he said wow mark that's great visibility who could help mark with this problem and and of course then everyone tripped over each other to try to offer help and the funny thing though chris is that even after that people told me that they They fully expected when they showed up a week later that Mark was going to be gone, that Alan had just put on a brave face for the meeting

and that he had quietly taken him out behind the woodshed and lopped his head off in the next seven days. When Mark showed up the next week and wasn't in trouble and wasn't, you know, demoted or on the way out the door, everybody said, wow, I guess he really does mean it. And the meeting after that, as Alan has described it to me, the slides were like, as he puts it, a beautiful rainbow of color, most of it red. You're listening to Motley Fool Money, talking with Bryce Hoffman, author of the bestselling book, American Icon, Alan Mulally and the Fight to Save Ford Motor Company. What surprised you the most when you were working on the book? Chris, the thing that surprised me the most

was just how close Ford got to going out of business. I mean, I had been covering this company every day since 2005, I thought I knew what was going on. And the truth of the matter is that even with this massive home improvement loan, Ford's decision not to take a government bailout to fix its problems itself was one of the gutsiest moves in recent business history. because to make it through the crisis, go back in time to 2009, 2008, when the auto industry was just tanking here, and Ford had the opportunity to join GM and Chrysler in a government-sponsored restructuring. They chose not to.

They made it through, but to do that, I mean, they canceled the services that watered the plants in their offices. They required a vice president's signature to order paperclips. They stopped shoveling the snow off of sidewalks on the campus. I mean, they cut so much just to keep the lights on through that period, but they paid huge dividends for them with the American public in particular. Coming up, Bryce Hoffman's biggest question about Ford and a round of buy, sell, or hold. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money, talking with Bryce Hoffman, author of the bestselling book, American Icon, Alan Mulally, and the Fight to Save Ford Motor Company. When you look around the world at the opportunities for automakers like Ford, like GM, and this is an industry that you've covered for years, Bryce, where are the great opportunities? because it appears that when you look at sort of large opportunities in China and Europe, China brings its own set of challenges with joint ventures, and Europe appears to be a place, and obviously I'm painting with a very broad brush here, but Europe appears to be a place right now that if you are an automaker or a shareholder of Ford Motor, your expectations about results in

Europe for the next several years should be zero. You're absolutely right. I mean, Europe is a huge drag on everybody's bottom line, not just Ford's, but GM's, Chrysler's by virtue of its ownership by Fiat, you know, all of the European automakers, certainly. I mean, Europe's ongoing economic crisis has just undermined their automobile industry in the same way that our economic crisis undermined our automobile industry in 2008 and 2009. The difference, Chris, is that in the United States, we were willing to make the tough decisions to make the industry's output capacity match the decreased demand. We closed factories. We eliminated jobs. We took an industry that was still spooled up to build cars like it was before there were companies like Toyota and Volkswagen

and competing with it and downsized it to the point that it could be profitable again. The Europeans are not willing to do that. They are not willing to let companies like Ford or Chrysler or Fiat or General Motors close factories and lay off workers without a major fight. And as a result, the industry there is just losing money at a phenomenal rate. Ford lost last year over $1.7 billion before taxes in Europe. You know, the opportunities, though, interestingly enough, America is an opportunity again, which is something that if you had said that just three or four years ago,

people in the auto industry would have laughed at you because we were in such bad shape. But the American auto industry is coming back. The American auto market is coming back, and that's helping buoy everybody's profits. But China, as you mentioned, China is the big opportunity. China is the holy grail in this whole thing for everybody because it has passed the United States to become the largest automobile market in the world. And, you know, companies like Ford need to grow there and grow there in a big way if they're going to succeed, you know, in the next century here, the rest of this century.

Ford is obviously a company you've studied very closely inside and out. At this moment in time, what is the big question you have about Ford Motor and their prospects? You know, the big question I have about Ford Motor, honestly, is why their stock prices. is so low. I mean, if you look at this, Chris, this is a company that generates, and let me just be clear, I don't own a single share of Ford, but they generate between $3 billion and $4 billion in cash flow annually right now, all of which is accruing to equity. And so I have to ask myself, why are the equity markets ignoring that? It's also a company that not only has restored dividends, but has doubled those dividends this year. And yes, there are problems in Europe, but I mean,

it's amazing to me, you know, that Ford is trading so low and that the financial markets aren't seeing the fundamentals that really exist there. But that doesn't mean that it's not a company without challenges. And I think the biggest one, honestly, Chris, is Lincoln. You know, they are in their umpteenth attempt to revive the Lincoln brand right now, and I'm still not sure it's going to work. Broadening out to alternative energy cars, you know, we hear about electric cars, hybrids. What do you think the next few years looks like when it comes to alternative technology? Well, you know, it's interesting because Ford has an electric vehicle and it can barely sell any of them. GM has struggled to sell its

Volts. Chrysler, through Fiat, just introduced its own electric vehicle, despite the fact that CEO Sergio Marchionne says that it's ridiculous because the only reason that they're building it for political reasons. And I think that, you know, this is the honest truth, though. I mean, for years, people have accused Detroit in particular of holding back the electric car. And for years, Detroit automakers have said they're not holding back the electric car, that they don't think the technology is quite ready for prime time. They think it's too expensive, and they're not sure people actually want them. Well, they've now finally all built them. And guess what? The technology is proving not quite ready for prime time. They're too expensive and

people don't really seem to want them. You're listening to Motley Fool Money, talking with Bryce Hoffman. His book is American Icon, Alan Mulally and the Fight to Save Ford Motor Company. Before we wrap up with a round of buy, sell, or hold, let me ask you one of the questions that I asked Alan Mulally when I interviewed him a couple of years ago. What was the first car you owned? The first car I owned was a Ford Econoline van. See, now that's great, because it was actually a Ford. When I asked Malali that question, I think I may have caught him off guard, because even though he was CEO of Ford at the time that I asked him the question, unfortunately for him, his first car that he bought was a Chevy, or that he owned

anyway. And I think that threw him a little bit. But you know, he's so on message that by the end of his answer, we were back to talking about Ford again. I'm not really sure how he pulled that off. Well, you know, Chris, I can remember the first time I met Alan at the press conference in Dearborn when Bill Ford announced that he was stepping aside and turning the company's day-to-day operations over to Mullally. And one of my colleagues asked him, what type of car do you drive? And without even pausing, he said, a Lexus. And there were audible gasps in the room. And he said, because it's the best car in the world. And there were more gasps, including by bill ford who kind of chuckled and said yeah it's being keyed as we speak

but but but then then malali said and you know what we're going to make ford's every bit as good if not better and and you know he it a big part of his strategy of his management system is honesty about not sugarcoating your mistakes and your shortcomings but but planting the flag about where you want to go and talking about how you're going to get there imagine that all right we will wrap up with a round of buy, sell, or hold. As we discussed earlier, this was Malali's baby when he was at Boeing, but it is grounded for the moment. Buy, sell, or hold the future of the Dreamliner 787. I think buy in the long term. It would be a long-term buy, I think, because I think that they will ultimately get it right, but I think it's going to have a lot of issues between now

and then. It's got a relationship with most of the major automakers. Buy, sell, or hold the future of Sirius XM Satellite Radio? Well, as much as I like listening to Sirius, I think that if you look at some of the technological advancements that are happening right now, GM just announced that they're going to put high-speed Internet in their automobiles over the next year or so. That's going to make it easy to do things that are a lot less cost-effective,

I mean a lot less costly than Sirius, like Sportify or Pandora in your car. That said, I'm sure that Sirius has got people working to come up with an evolutionary business model that will keep them in the game. And finally, this is an automotive technology that frankly scares me. Buy, sell, or hold Google's driverless cars. How about this? Buy insurance. Oh, believe me, I'm going to double up on insurance when those things hit the road in the mass market.

The Wall Street Journal named it one of the best business books of 2012. It is American icon, Alan Mulally, and the fight to save Ford Motor Company. It is available everywhere in paperback. Bryce Hoffman, thanks so much for being here. Thank you, Chris. That's it for this edition of Motley Fool Money. To check out the Motley Fool's list of the 25 best companies in America, go to fool25.com. The show is mixed by Rick Engdahl.

Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.