- Record profits, growing sales, robot taxis fail to move shares
- CEO Fields to reframe strategy at Sept. 14 investor meeting
Record profits, strong sales, an aluminum truck, a road map for rapid rollout of robot taxis. None of these developments have managed to lift Ford Motor Co.’s stock.
Investors instead have punished Ford for more than two years, driving down shares by 26 percent since boss Alan Mulally retired and company veteran Mark Fields took over as chief executive officer. Now Fields and Chief Financial Officer Bob Shanks are going to take another shot at convincing Wall Street that the 113-year-old automaker is worth the bet.
Fields and Shanks get their chance on Sept. 14, when they map out a strategy to investors and analysts at headquarters in Dearborn, Michigan, against a backdrop of diminished expectations for all automakers. Investors have soured on car stocks as U.S. auto sales plateau, a run of record profits nears an end, and new rivals emerge.
“There is a lot riding on this investor meeting because Ford has been unable to really move the needle on the stock price, despite some pretty bold announcements and projections,” said Jeff Schuster, an analyst with consultant LMC Automotive.
Ford said Friday that it’s expanding its mobility business by providing bikes and shuttle services in big cities starting with San Francisco to help ease congestion. As part of the move, Ford is acquiring the Chariot shuttle service for an undisclosed price.
Some of the forces working against Ford have roots in Silicon Valley. Alphabet’s Inc.’s self-driving Google car and Elon Musk’s battery-powered Tesla hot rods are ascendant as alternatives to old-guard automakers.
Fields, 55, attempted to fire back with an ambitious strategy he revealed last month to roll out self-driving cars -- with no steering wheel, gas or brake pedals -- and have them available for ride-hailing services by 2021. In a note, UBS analyst Colin Langan raved that Ford was “moving from autonomous laggard to leader.”
Yet Wall Street wasn’t impressed and traded the shares down. That led Adam Jonas at Morgan Stanley to conclude that investors don’t view Ford as anything more than a legacy automaker, forever tied to the rise and fall of the automotive sales cycle.
“Ford has made numerous announcements of strategic and technological initiatives aimed at Auto 2.0,” Jonas wrote Aug. 17. “Yet the stock market doesn’t seem to care. Ford’s stock price has underperformed the S&P by nearly 20 percent year to date.”
Ford spokesman Brad Carroll said in an e-mailed statement: “We do not run our business based on day-to-day stock changes. Everyone at Ford is totally focused on continuing to make progress on our One Ford plan to deliver profitable growth for all of Ford’s stakeholders.”
All this talk of autonomous cars could be taking Ford’s eye off the ball, said Bernie McGinn, chief executive officer of McGinn Investment Management of Alexandria, Virginia, which holds about 400,000 Ford shares that it acquired during the Mulally years. Mulally successfully managed during the recession, pushing up shares more than 10-fold from November 2008 to January 2011.
“My fear is that they’re losing a little bit of focus," McGinn said in an interview. "It’s nice to talk about the driverless car, but you’re in the business of selling cars now, not five or six years from now."
It wasn’t supposed to work this way. Executive Chairman Bill Ford told restive investors at the annual meeting in May he expected things to improve once Ford clarified how it would go up against the tech giants.
“It’s not clear yet to the market where this whole mobility world is going and who the winners are going to be, who the losers are going to be,” Ford told investors asking that he bring back Mulally to help boost the stock. “We really haven’t laid out our story. We plan to. And I believe when we do that, you’ll see a better set of analysis from the outsiders looking in.”
Rather than focusing on Ford’s driverless future, investors have reacted to company’s diminished profit outlook. Its shares haven’t recovered since an 8.2 percent drop on July 28, when earnings fell short of analysts’ second-quarter estimates and Ford said its goal to match or beat last year’s pretax profit of $10.8 billion was “at risk” due to slowing sales and rising costs. That risk-warning was borne out on Thursday, when Ford lowered its forecast to about $10.2 billion because of an expanded door-latch recall. The shares were down 9.7 percent this year through Thursday.
Ford’s stock dropped 1.7 percent to $12.52 at 1:37 p.m. in New York, as the broader markets also fell.
“The last quarter was particularly surprising and disappointing,” Efraim Levy, an analyst for S&P Global Market Intelligence, who rates Ford a strong buy, said in an interview. The company’s commentary about the U.S. auto market being past its prime “was surprisingly negative. Is it that bad? I didn’t think it was that bad.”
The plan Fields laid out last month envisions a day when commuters summon driverless transport pods on their phones that will whisk them around as transportation transforms into an on-demand service rather than an expensive machine that consumers buy. This year he created a new unit, Ford Smart Mobility LLC, to develop autonomous autos and explore opportunities similar to Uber Technologies Inc.’s burgeoning ride-hailing business.
Ford is doubling the size of the staff at its Silicon Valley lab and is investing in or collaborating with 40 startups in autonomous vehicles. Last month, the automaker and China’s top search engine company, Baidu Inc., said they would each invest $75 million in Velodyne Lidar Inc., a leading maker of an advanced radar system that bounces light off objects to assess shape and location, giving self-driving cars a 360-degree view of their surroundings.
None of that impresses investor McGinn as much as Ford’s current model line, which includes the aluminum-bodied F-150 pickup. U.S. sales of the F-Series, the top selling vehicle line in America, are up 6.7 percent this year to 527,847 models. Yet he is frustrated Ford isn’t rewarded for that.
"Ford was a great idea, but it hasn’t been a great investment," McGinn said. “I made a lot of money initially, but since then I’ve held it and there is a cost to holding stocks. By the first quarter of next year, I might try to find something else."