Howes: Ford folks play catch-up in bid for respect, higher share price
Forgive the folks running Ford Motor Co. if they feel a little like Rodney Dangerfield.
He’s the ol' comic who constantly complained that he “got no respect,” a familiar lament in Dearborn as the Blue Oval’s long-in-coming restructuring continues to cloud investor sentiment and raise as many questions as it answers. There’s a reason for that: Ford is following its cross-town rivals.
Fiat Chrysler Automobiles NV’s legendary CEO, the late Sergio Marchionne, exited the U.S. car business three years ago, long before the market’s trend toward trucks and SUVs was undeniable. He was ahead of his time, which is why Detroit's No. 3 automaker is planning to add manufacturing capacity and jobs this year, not cut both.
And General Motors Co.’s Mary Barra is reckoning with her excess North American plant capacity the only way she can right now. She's moving to drop most sedans from GM's U.S. lineup and close four plants in the United States and one in Canada, whatever the predictably furious pushback from politicians, communities and the United Auto Workers.
The net effect of all this ferment for Ford? Despite its own plans to winnow its salaried workforce and whittle its U.S. car offerings to the iconic Mustang and its souped-up variants, Ford suffers by comparison. That's an uncomfortable fact its leadership doesn’t much like but can’t easily deny.
"The shiny new thing — and everybody loves the shiny new thing — is not a 115-year-old company," Executive Chairman Bill Ford said last week at "The Final Word" event closing press days in advance of the North American International Auto Show's opening to the public.
"But the fact is we're actually making ourselves into the shiny new thing, and some people are starting to pay attention. As we get through this year, people will start to really understand what this is all about."
They're not there yet, as Wall Street signaled again this week in yet another tranche of opinions on where Ford is going, how it will get there and whether it's meeting expectations for transparency and speed. The answer: not so much.
“Much more clarity needed on restructuring plan,” Deutsche Bank headlined its Thursday note on Ford, issued less than 24 hours after the automaker posted its financials for last year. “While investor frustration with the perceived slow progress of Ford’s restructuring actions remains understandably high, it seems their benefit could accelerate this year.”
Adds Morgan Stanley: "We continue to see Ford as an emerging turnaround story, but still believe investors are waiting for a more significant 'capitulation' in results ..., a potential downgrade in the credit rating, a potential cut in the dividend or further transparency on strategy before increasing exposure. In short, while the ingredients are there ... we think it's too early to turn positive on Ford."
And David Kudla, CEO of Grand Blanc-based Mainstay Capital Management LLC, said: "Wall Street remains unimpressed and disappointed and the stock price is showing it. Ford's stock price is suffering because it discounts the future and investors are unclear as to what the future is at Ford."
External forces neither Ford nor its competitors can control don't help. Steel and aluminum tariffs are driving materials costs higher, eating profits. U.S. trade tensions with Canada and Mexico, China and the European Union drive uncertainty and complicate decision-making. A shutdown of the federal government that runs to the end of March could push growth in GDP close to zero, says the Trump administration's own economist.
In that context, the Blue Oval is playing catch-up. The less than three-year tenure of former CEO Mark Fields wasted valuable time that his successor, Jim Hackett, is being forced to make up in what he calls a "redesign" of the core automotive business — a necessary precondition to optimizing the financial gearing needed to pay for the Auto 2.0 spaces of mobility, autonomy and electrification.
Right idea, but his method is what's proving exasperating to investors and analysts paid to second-guess management. Where Marchionne was a proud iconoclast and Barra is a decide-and-go kind of CEO, Hackett is a methodical Big Thinker whose style does not neatly mirror Wall Street's assumptions of what an auto CEO should be.
But, then, neither is Ford. It stands alone among American automakers, a century-old industrial cornerstone whose founding family still exerts control over the Blue Oval's direction, culture and top leadership. Barra's GM, by contrast, is a more pure investor play, reconstituted in a federal bankruptcy that deeply influenced the senior leaders who survived and focused their attention on investors.
That's why Morgan Stanley last week described Barra as "one of the most effective CEOs in the business — a reputation earned from a track record of success, capital return, product execution and decisive actions under extreme pressure." Namely, from Wall Street, traditional rivals and emerging competition from Silicon Valley.
Among the major global automakers, GM and its capital structure also stand alone. Outside the United States, FCA is controlled by Exor SpA, the founding Agnelli family's holding company. BMW AG is controlled by the Quandt family. The Porsche and Piëch families, along with the German state of Lower Saxony, control more than 70 percent of voting rights in Volkswagen AG. The French government owns 15 percent of Renault SA, the controlling partner in the Renault-Nissan alliance.
But it's on Wall Street, epicenter of impatient American capital, where Ford and GM compete for credibility, leadership and respect — a decades-long contest GM appears to be leading, at least for the moment.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.