Ford's turnaround pinned on new fleet as outlook remains treacherous
Ford Motor Co. is trying to drive past a difficult 2018 with a slate of new vehicles and an aggressive overhaul of its operations, but with the problems that plagued the iconic carmaker last year poised to remain in 2019, analysts are skeptical of the company's promise to improve earnings.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| F | FORD MOTOR CO. | 12.14 | +0.08 | +0.66% |
Ford is in the midst of an $11 billion global restructuring effort that includes thousands of job cuts across Europe. Layoffs in the U.S. could be next, analysts say, though the number is likely to be far less than competitors. As concerns grow, Ford CEO Jim Hackett downplayed the threat of U.S. job cuts. “I’m confirming that there’s no blue collar cuts in the offing,” Hackett told FOX Business’ at the North American International Auto Show in Detroit earlier this month.
Meanwhile, the Dearborn, Mich.-based company is facing millions of dollars in added costs in 2019 due to President Trump’s tariffs on steel and aluminum imports, higher taxes and a potential global economic slowdown that could further dent sales in lucrative markets like China.
The company has provided few details on its financial outlook for the year, apart from suggestions that earnings could improve after a string of quarters of comparative, double-digit profit declines. And as rival General Motors’ stock is on the rise, Ford’s is spiraling to a nine-year low, spurring questions about the future of top executive Jim Hackett.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GM | GENERAL MOTORS CO. | 42.38 | -0.07 | -0.16% |
“CEO longevity and stock price performance go hand-in-hand,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners, during an interview with FOX Business. “GM over the past five years has significantly outperformed Ford.”
Ford, which declined to comment, has a plan to try to navigate the tumultuous environment. This year, the company is adding updates to its lineup including the Ford Escape, Explorer and Lincoln Corsair, along with the new Ford Ranger and Lincoln Aviator, offerings that could help bolster earnings in 2019, according to Morningstar’s David Whiston.
“The company now makes cars people actually want to own instead of vehicles that are purchased only because of heavy incentives,” he wrote in a recent note. “Management by its own words needs to get the company more physically fit so it can better offset headwinds it cannot control, such as currency and commodities.”
The company also recently announced the launch of a global alliance with Volkswagen AG to build commerical mid-sized trucks and self-driving cars, though the news largely fell flat on Wall Street.
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Ford’s struggles come amid a strong U.S. auto market. As overall sales in 2018 brushed against record highs, Ford’s slipped 3.5 percent while GM sales fell 1.7 percent for the year.
Investors “are growing concerned about pressure to the North America truck business and a lack of improvement abroad,” Goldman Sachs analysts wrote in a recent note.
Ford, which is poised to report fourth quarter earnings on Wednesday, has “an opportunity to help quantify tailwinds, headwinds, regional expectations, and generally provide incremental detail of its improvement plans,” the analysts wrote.
GM is plotting many of the same moves as Ford. The company – which earlier this month said it expects 2019 earnings above analyst expectations – recently announced it would lay-off thousands of employees and shutter several plants in North America as part of a refocus towards trucks, crossovers and SUVs, along with autonomous vehicles.
While the decision spurred intense congressional backlash, Barra has defended her decision, most recently telling FOX Business "having a strong General Motors that can invest in the future that’s going to be here not just for a few years, but for several decades is our focus.” Among investors confidence in Barra appears high.
Barra “is the greatest CEO of General Motors,” Feinseth, whose firm has a “strong buy” on GM, said. “She has a mission, she has a strategy and she has a process and has executed it well.”