In light of recent automotive industry news, it would seem that Ford Motor Co (F) is not built as tough as advertised. In the days leading up the automaker’s release of their third-quarter results, Ford’s (F) stock dropped 1.5% to a nine-year low, trading at just above $8 per share. As limited-edition Trump tariffs and trade tensions with China increase, Ford seems to be up a certain type of creek without a paddle.
The American automaker does business in hundreds of countries around the world, but the U.S., China, and the 20 countries that make up western and central Europe (the “Euro 20”) account for the majority of its sales. Over the course of the last year, Ford’s sales fell nearly 4%, largely in part to the dwindling consumer interest in their sedan offerings.
In April, Ford (F) announced in their quarterly financial report that they will no longer be investing in the next generation of sedans for North America.
“Over the next few years, the Ford (F) Car portfolio in North America will transition to two vehicles — the best-selling Mustang and the all-new Focus Active crossover coming out next year. The company is also exploring new ‘white space’ vehicle salutes that combine the best attributes of cars and utilities, such as higher ride height, space, and versatility.”
–Ford Quarterly Financial Report April 2018
Ford (F) claims that by 2020, 90% of its portfolio in North America will be trucks, SUVs, and commercial vehicles. Honestly, Ford’s (F) discontinuation of their sedan lineup makes total sense. Unless there’s a “My other car is at Hertz Rental” license plate cover, consumer demand for Ford sedans is decreasing. The Ford Taurus has existed long before the dawn of time, and the Fiesta and Focus just don’t have the millennial sex-appeal necessary survive.
Through the month of September, reports indicate that Ford has sold 378,533 cars, down 17.4% from the prior-year-to-date figure. Ford (F) studied these trends and says the appearance of sedans has dropped from 57% in 2010 to roughly 30% at present. Kumar Galhotra, Ford’s group vice president and president of Ford North America gave a statement of obligatory assurance to consumers, saying that Ford isn’t “getting out of passenger cars” but merely “getting out of sedans.”
Ford (F) CEO Jim Hackett held a company dealer meeting in Las Vegas on Thursday, at which time Hackett and other Ford executives shared with attendees their plans for new models of the Explorer and Escape SUVs, as well as the new Ranger mid-sized pickup truck, and an “unnamed smaller off-road utility vehicle” that many believe to be the revival of the Ford Bronco.
“I feel better after seeing the product.”
–Jim Seavitt, owner of Village Ford Dearborn, Michigan
While Hackett tries to comfort the hemming and hawing of Ford dealers around North America, the automotive sector of the market has made their own assumptions of the company. Adam Jonas, an analyst from Morgan Stanley, believes that the automaker is “suffering from a perception among investors that it lacks transparency and is failing to take quick, decisive action in executing a turnaround plan,” according to CNBC. Jonas believes that the market needs significant evidence before embracing “the Ford restructuring story.”
The “restructuring story” that Jonas touched on is based on Ford’s recent announcement of an $11 billion plan to rebrand the company, including the aforementioned plan to discontinue its North American distribution of sedans.
Jonas, on behalf of Morgan Stanley, downgraded Ford Motor Co from overweight, their version of a buy rating, to equal weight. He then lowered his 12- to 18-month price target from $14 to $10 a share.
“We had hopes that Ford (F) management would move the other way with transparency and increase engagement with investors on a long-term strategy in a more proactive way,” says Jonas, but unfortunately this is not the case.
As for the Future of Ford Motor Co (F), the company will need to produce results for investors that show they are being proactive and working towards tangible goals.
Ford (F) has existed for the last one-hundred years by creating the vehicular embodiment of the American dream. Let’s just hope this can continue.
