Wall Street Concerned Over Ford CEO's Cautious Strategy

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.”