By on January 23, 2019

jim_hackett

Remember Mark Fields, the former Ford CEO who was forced to retire due to an inability to manifest his vision of the company’s future in a timely manner? Well, it’s starting to look like Wall Street needs another sacrificial lamb. Ford’s current chief executive, Jim Hackett, appears rather appetizing.

Despite promises from company chairman Bill Ford that the automaker would see swifter decision making under Hackett, it hasn’t felt all that differing from the company’s Fieldsian days. There’s still a strong emphasis placed on transforming Ford into a mobility company with no obvious path on how to get there. While it might be a little unfair of us to slam Fields or Hackett for their inability to accurately map out the future like some mythical sage, investors expect exactly that. As a result, Ford’s stock price has continued to tumble. 

For what it’s worth, Hackett has proven slightly more daring. Under his leadership, Ford has vowed to rejigger itself into a truck and SUV provider while continuing work on its identity as a mobility firm. It also pared down some of its profit-losing projects, including one Hackett helped develop, and unveiled a restructuring plan for Europe.

It even announced a new corporate alliance with Volkswagen. But none of it has been enough to help the company’s paltry share price rebound. As things stand, Ford’s stock valuation is down 22 percent through Hackett’s term — which isn’t all that different from what happened during Fields’ tenure.

On Wednesday, Hackett asked investors to have patience and belief in his approach in tackling the company’s $11 billion restructuring. Unfortunately, Wall Street doesn’t care about being patient, unless you can prove that it comes with a financial reward. Ultimately, investors sent Ford’s share price down by another 6 percent after a meager boost just a few days earlier.

“Wall Street is just frustrated and tired of waiting,” David Whiston, an analyst with Morningstar Inc., told Bloomberg as part of its financial assessment of Ford. “It doesn’t look like they’re moving quickly.”

A lot of this has to do with Ford’s inability to get specific. General Motors has outlined most of its long-term plans, even the more diabolical ones, in great detail. While recent revelations have shown that its mobility program might not be on the bleeding edge as previously believed, and widespread layoffs have garnered unfavorable press, it’s stock is still hovering around $38 per share while Ford’s is resting below $9.

“It feels like they still don’t have a lot of details about their restructuring,” said Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive. “Wall Street doesn’t take to that very well. They want to be convinced that things are going to turn around, and the company is on the right path. Ford hasn’t demonstrated that.”

We would argue that General Motors hasn’t done anything demonstrably different, save for being more upfront about what it’s doing. Both companies have have trouble with their new businesses and are in the midst of restructuring. While GM has taken the lead on in-car marketing and connectivity, Ford doesn’t appear to be terribly far behind, with a similar model in the works. In fact, the biggest difference between the pair is that Ford isn’t doing nearly as well in China — something that seems to count for a lot on Wall Street these days.

Meanwhile, Fiat Chrysler is only tangentially involved with autonomous driving through its partnership with Waymo, and managed to see major improvements in its share price after 2017. It’s currently trading quite a bit higher than Ford, at around $16 per share. What’s different is that FCA doesn’t have major aspirations in terms of vehicle autonomy or electrification. However, it does have a reasonably clear pathway to the future, as well as more Asian involvement than Ford.

Most assumed Ford’s VW announcement would impress investors. But its stock tells the story; no one was biting last week. Some argue the deal is better for VW, at least until its battery tech starts showing up in Ford products.

From Bloomberg:

By week’s end, Hackett’s boss, Executive Chairman Bill Ford, was defending his CEO’s strategy and appealing for patience from Wall Street analysts frustrated that the company won’t provide hard numbers on job cuts and financial targets.

“We can’t really tip our hand beforehand on a lot of the things that we’re doing,” Ford said in an on-stage chat during the auto show with Detroit News business columnist Daniel Howes. “So, we’re having to sort of say to people, well, take our word for it. Well, analysts have models they have to create and taking your word for it doesn’t fill out a model.”

Morningstar’s Whiston said of Ford: “They’ve been saying ‘take our word for it’ for a long time.”

The big issue seems to be Ford’s inability to formulate and share plans with investors. GM has probably been overly ambitious with its own planning, while FCA has been more cautious; still,  both told the public “here’s where we are now and this is what we’re doing.” Ford hasn’t, at least not to the same degree, and that has proven a sticking point for many.

Morgan Stanley analyst Adam Jonas issued a note last week praising GM CEO Mary Barra while claiming Ford “has a significant gap to GM in terms of repositioning the business for long-term sustainability.” Jonas rates GM the equivalent of a buy and cut Ford to a hold in October. That’s been typical over the last year. The Motley Fool’s Dan Caplinger recommended FCA over Ford as the “better buy” last August.

“We see a path to improvement for Ford but believe the situation may need to get worse before it gets better,” Jonas wrote in his assessment. “Ford has been here before, and we believe has every opportunity to improve its fortunes under the right combination of leadership and strategy.”

 

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57 Comments on “Wall Street Concerned Over Ford CEO’s Cautious Strategy...”


  • avatar
    OE Supplier Veteran

    A furniture guy is trying to run a car company.
    Perhaps it’s helpful at this point to apply Occam’s Razor?

  • avatar
    EBFlex

    Hackett has done nothing for Ford other than stop making cars.

    Ford’s current products leave a lot to be desired and the future ones are not any better. Hackett was a massive mistake.

    Fields was the fall guy for all of Mulallys mistakes. If Fields was still there Ford would be doing a lot better.

    • 0 avatar
      Maxb49

      You’re absolutely right.

    • 0 avatar
      DenverMike

      It’s sniveling for the sake of sniveling, and makes no sense. I’m not hearing anyone complain VW can’t make a decent midsize pickup, BOF SUV, let alone a 1/2 ton pickup.

      The partnering if not conspiring to share products, tech and otherwise, is something we’re going to see a lot more of, so you might as well get used to it now.

      If Ford can just focus its energy on constantly improving their trucks (and pony/sports cars) instead of burning much of it on everyday cars/sedans for marginal returns, who knows what can happen?

    • 0 avatar
      carguy67

      What were “Mulally’s mistakes?” I believe he greenlighted the Raptor–during a gas crunch–and the Coyote engine (hardly mistakes, IMO). He’s also the one responsible for mortgaging the whole company–including the logo–so Ford wouldn’t have to declare bankruptcy like GM and Chrysler (some people haven’t forgotten).

      Also, Ford stock went from peanuts–about a buck-fiddy IIRC–to over $18 during Mulally’s tenure (almost bought some at $1.50; still kicking myself).

      • 0 avatar
        EBFlex

        “What were “Mulally’s mistakes?” I believe he greenlighted the Raptor–during a gas crunch–and the Coyote engine (hardly mistakes, IMO). He’s also the one responsible for mortgaging the whole company–including the logo–so Ford wouldn’t have to declare bankruptcy like GM and Chrysler (some people haven’t forgotten).”

        His entire business plan was “profits now, recalls later”. I don’t care what product he green lighted, the Raptor is insignificant in Ford’s overall sales.

        He removed every last bit of quality from all Ford vehicles and it shows. Short term gains, long term losses. Mulally was a cancer. And Fields took the fall.

    • 0 avatar
      JoDa

      Fields was let go because of Fords low share price…Like furniture guy would solve that. Ford’s Board are basically idiots.

      • 0 avatar

        When Fields was in charge Ford’s stock price was 20% higher. Ford now has the lowest stock value of the big three. Jim Cramer told investors other day stay the hell away from Ford stock.

        In October of last year Ford stock was almost junked. It is beyond me how Hackett keeps his job.

  • avatar
    V16

    Ford’s “better idea” is,
    “We can’t design, engineer or market an automobile for the 21st century.”
    But we have trucks, lots of trucks to sell.

    • 0 avatar
      EBFlex

      Bingo.

    • 0 avatar
      APaGttH

      I think the Ford Fusion is well designed and engineered – certainly well designed and not anywhere near as overwrought as the Accord or Camry, or yawn inducing as the Malibu and Altima.

      1000% agree they can’t market a car to save their life, and if it isn’t Denis Leary screaming at me about the F-150…

    • 0 avatar
      danio3834

      If anything, if Ford were up front with plans to ensure competitive mainstream truck dominance, that would assure investors.

      Hackett and co. seem to think that they can trick investors into thinking Ford is a tech company with all this mobility and alternative powertrain nonsense. No one is convinced that crippling your margins is great for business and there is no hype around the stock to promote short action.

  • avatar
    xflowgolf

    Per the Bloomberg article, this is perhaps the most aggregious mistake in handling expectations:

    “It started when Hackett asked for 100 days to formulate a plan and underwhelmed with his first address to the analysts in October 2017. The plan was 35 days late. He then promised to achieve an 8 percent global pretax margin by 2020, only to abandon that months later as Ford’s fortunes worsened. After announcing a corporate overhaul in July, he declined to provide details and canceled a planned analyst meeting.

    “Ford’s not helping itself by doing things like canceling analyst day,” said Whiston. “That doesn’t help your credibility.”’

  • avatar
    ajla

    Ford has a better lineup than GM but it sounds like they are being punished for not outsourcing a large percent of their labor to China/Mexico and they aren’t burning enough cash on SmartCity pogo sticks that play ads for Applebee’s while you ride them.

    • 0 avatar
      carguy67

      My feeling as well.

    • 0 avatar
      Asdf

      Ford did plan to import the next generation Focus from China to the US, and if it weren’t for Trump, it would have happened. However, people haven’t forgotten, and Ford’s current struggles are simply a manifestation of karma. Ford deserves to go bankrupt for its eagerness to throw the American worker under the bus (as does GM).

  • avatar
    Fred

    Wall Street only understands boom and bust. Slow and steady is not something they appreciate. Heck that would mean we would buy Ford stock and hold on to it for the long term. Up and down market then the traders make commission, not to mention the money you keep in their savings at low interest.

    • 0 avatar
      highdesertcat

      “Wall Street only understands boom and bust.”

      I disagree. Wall Street understands and is influenced by a lot of factors, including political.

      Case in point, the current US gov’t partial shutdown. Here you got two old people railing against one another, one who was elected by one city, the other who was elected by the national electoral college.

      Is there any doubt who’s gonna win this one? Nope.

      Yet this whole insignificant confrontation of the ant against the elephant has an impact on Wall Street.

      Ditto with the trade war with China.

      Is there any doubt as to who is going to win? Nope.

      Investors get jittery when they lose sight of the larger picture, but the real pros hang in there for the long haul, because “this, too, shall pass.”

      • 0 avatar
        Fred

        Back to Ford…they announced plans for slow growth and the market sold their stock, on a day when the market in general was up. Although transportation and durable goods were down.

        • 0 avatar
          carguy67

          I think all manufacturing is considered old, slow-growth; i.e. not ‘sexy’ like tech and finance. When the ‘sexy’ wears off of Tesla the stock will follow suit.

  • avatar
    sportyaccordy

    One pet peeve- stock prices are irrelevant w/o context; better to cite market cap. Ford is at $32B, GM is at $53B. Ford’s down from like 60B after the end of the recession; GM’s been bouncing around between 40-70B. Keep in mind Ford was down at like 13-15B before the recession so they are still up as a company overall.

  • avatar
    Jerome10

    I’d fire Hackett. And maybe Bill Ford as well. I have a pretty bisg suspicion he is pushing the buttons behind the scenes and has to be the one pushing all this future mobility bet the farm junk.

    Then on the same day take Ford private.

    Listening to Wall Street snakes will get your company nowhere. If they could buy up Ford cheap enough today, chop it up, and make $10 doing it they would. They’re not there to do Ford any favors. Ignore them. This is the same group of people that has Tesla worth more than Ford, which any idiot knows is beyond stupid. Chase stock price at the company’s risk. GM will probably ride their high stock price right into the Grave listening to finance guys.

    Maybe channeling old Henry would be worthwhile here. “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”. His progeny should keep this sentiment in mind.

  • avatar

    Has anyone noticed that Toyota has surpassed Ford in US sales?

    Ford had a great one two punch with both the Fusion and MKZ. The MKZ is my favorite American car after the CT6V. If I had the money I would trade my Fusion in for a MKZ.

    The Malibu is virtually the only America car I can purchase now. USnews ranks the Malibu 9th out of 15 midsized cars. I guess that means it is decent car.

  • avatar
    R Henry

    So, Bill Ford pulls all the strings? Is Ford CEO simply an honorary title?

  • avatar
    Boxerman

    The article hints at fords problem, China. That is the worlds largest car market and its set to grow, ford is nowheresville.
    They have at this poont two iconic products, the F150 and mustang, besides those two everything else ford makes could dissapear tomorrow and people would barely notice.

    The Aviator looks nice, but 90K for a a redone explorer platform, cmon. Then look at the the mandatory options to even get a nice aviator.

    They need product and a plan in China

    • 0 avatar
      highdesertcat

      “They need product and a plan in China”

      Yes, Ford does need a plan for a market, any market, outside of North America.

      • 0 avatar
        Steve203

        “Yes, Ford does need a plan for a market, any market, outside of North America.”

        They have a plan: outsource design and production of products too small or low priced to bother with in the US, but never the less are needed to participate in other markets, to other companies. Mahindra is working on an SUV for the Indian market for Ford. The new Chinese market Ford Territory is a rebadged Yusheng S330. The next Transit Connect with be a rebadged VW Caddy. I wouldn’t be surprised if the next Ka, Fiesta and Focus all spring from the VW parts bin.

    • 0 avatar
      thornmark

      Ford shouldn’t waste money trying to build market share in China – all China wants is Western tech.

      Look at Apple and others – once China gets the tech they need, they manufacture almost the same product at lower prices w/ Chinese companies.

      The GM plan was to import Chinese product as “Buicks”, whatever a Buick is.

      – but thankfully that plan looks abortive.

  • avatar
    carguy67

    New CEO waiting in the wings?

    https://www.thetruthaboutcars.com/tag/kumar-galhotra/

  • avatar
    GregLocock

    I love the kindergarten financial analysis. The share price means nothing. It is shares*no. issued that matters.

    Presumably Matt thinks one $100 bill is worth more than two hundred $1 bills.

  • avatar
    GregLocock

    I love the kindergarten financial analysis. The share price means nothing. It is share price*no. issued that matters.

    Presumably Matt thinks one $100 bill is worth more than two hundred $1 bills.

  • avatar
    JoDa

    3 major problems at Ford.

    1.Ford has a $150B debt to service.
    2.Ford has a $150B debt to service.
    3.Ford has a $150B debt to service.

    All analysis should start with that.

    • 0 avatar
      danio3834

      Most of that figure is associated with Ford Credit’s lending business and represents a necessary part of doing business.

      Automotive debt is only around $12B.

  • avatar
    Erikstrawn

    “It also paired down some of its profit-losing projects”

    Pared down, as in “you use a paring knife to pare an apple”.

  • avatar
    Eric the Red

    I have a dog in the fight. Have owned Ford Stock for 30 years and for most of the time have been disappointed in its performance. At this point I feel it can only go up but have felt that way many times before. I have had financial advisors tell me to dump it but I keep on hanging in there. Recent Mistakes made: discontinuing the Ranger in 2012. Ford is big in trucks and this was STUPID. They had the biggest share of small trucks at the time and they threw it away! At least they have realized their mistake but will take years to rebuild the smaller truck market share. Allowing their cars to get to the point it was easier to discontinue than to make them top of the line. Okay, cancel the Taurus and Fiesta but damn, you should keep the Focus and Fusion. They are good cars and keep making them better. Everything is getting too expensive! When the economy declines the average transaction price that the F150 brags about will become a liability. Okay to have some expensive trims levels but need to keep vehicles affordable. Quality is Job One isn’t being lived up to. They are good vehicles but not great. Make them bullet proof and you can get the premium that all auto companies are after. Never forget that Ford is ran by the Ford family (control 40% of all voting rights and with that amount they DO control the entire company). While they do want to make money, they often times aren’t as concerned with share price. They want the dividend!

  • avatar

    Isn’t he cute? Friendly and forgiving smile.

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