Wall Street Doesn't Think Much of Ford's Relationship With Volkswagen

Like stern parents who just don’t understand, Wall Street analysts are playing hard to please when it comes to the alliance forged between Ford and Volkswagen. The two automakers made their deepened relationship official at last week’s North American International Auto Show, promising to breed a new generation of commercial vans for the European market, a Volkswagen-badged Ranger pickup, and perhaps much, much more.

While financial onlookers are of two minds on the tie-up, Ford’s stock has its mind made up. It’s staying in its room, as stubbornly depressed as before.

As there’s no cross-ownership in this alliance, both automakers clearly wish to keep their future options open. They’re not buying a house and picking out china patterns, just shacking up for a bit. We’ll see where it goes.

The possibilities are many. Volkswagen seems interested in Ford’s investments in autonomous mobility (self-driving cars and related tech), while Ford has reason to desire VW’s MEB electric vehicle architecture. It’s true that the tie-up could solve some of Ford’s European woes, where its business acts as an anchor dragging down the company’s global balance sheet, as well as VW’s need for an Amarok pickup replacement. (The planned pickup, developed with joint funds and built by Ford, would only come along in 2022, once the next-gen Ranger arrives.)

It’s worth noting that the Ranger-based pickup wouldn’t be made available for sale in the U.S. The absence of new product for U.S. consumers arising from the alliance met with tepid interest from Wall Street.

As cited by Automotive News, rockstar analyst Adam Jonas of Morgan Stanley was firmly in the “meh” camp, telling investors the firm “wouldn’t get too excited” about the partnership. “We believe it is unlikely that VW would collaborate on anything significant with any OEM that it could not substantially control,” he added.

John Murphy of Bank of America Merrill Lynch warned of risks arising from the alliance, saying “What’s good for VW might not be so good for Ford.”

Both Ford CEO Jim Hackett, who insists the alliance will create value for both companies, and chairman Bill Ford stand by the decision. The two men have previously stated that Ford’s playing a long game; results won’t happen overnight.

Bill Ford on the @Ford– @VW partnership, and the tepid reaction from analysts who expected more:

“We want to walk before we run.”

— Michael Martinez (@MikeMartinez_AN) January 17, 2019

Certainly, the announcement didn’t do anything for Ford’s stock price, which is commonly cited as the cause of former CEO Mark Fields’ ousting. Share prices dipped following last week’s news, not recovering fully in the days since.

Bill Ford, speaking at last week’s Automotive News World Congress in Detroit, said playing the long game means confusion in the short term, at least among analysts.

“We can’t really tip our hand beforehand on a lot of the things we’re doing,” he said. “We have to sort of say to people ‘Take our word for it,’ but analysts have models they have to create. Taking our word for it doesn’t fill out a model.”

[Image: Adam Tonge/TTAC]