Ford Chairman Bill
Ford’s Chairman proposed a new tight-lipped policy
His comments highlighted a tension between what Wall
Street wants from established carmakers and how those companies
actually want to run their businesses.
Ford’s advantage is that it has been steadily
profitable for years and has considerable resources to control
its own destiny.
On Tuesday, Ford Chairman Bill Ford put Wall Street on
“This is a very competitive world we’re in,” he said in
according to Bloomberg’s Jamie Butters. “You want
give Wall Street enough information, but you
also don’t want to
telegraph exactly where
It was the chairman’s version of what President Gerald Ford
reported to have said to New York City during it 1970s
Historical humor aside, the upshot is that Ford isn’t
going to detail its future plans as thoroughly as everyone
thought it was after CEO Mark Fields was ousted in favor of Jim
Hackett, who had been running Ford’s Smart Mobility division and
was, as former Ford board member, tight with Bill Ford.
But in many ways, Ford was simply voicing the way that
old-line auto-industry people think of the financial
Detroit’s frustration with Wall Street dates back to the
financial crisis when both General Motors and Chrysler were
bailed out by the federal government before plunging into
bankruptcy. The Treasury effectively nationalized the carmakers
for a few years, but wrote insolvent banks a blank check.
Ford avoided that fate because then-CEO Alan Mulally, Bill Ford,
and the Ford board collectively decided to borrow billions before
the bottom fell out. But Ford also took its lumps; the stock fell
to less than $2 at one point.
The US auto industry has rebounded impressively, but it still can
get respect from Wall Street. GM shares have languished literally
for years and have only recently surged past the carmaker’s 2010
IPO price of $33 per share, as the company has caught investors
attention for it self-driving-car and electric-vehicle plans.
Fiat Chrysler Automobiles has also recently seen shares pop, but
that’s because CEO Sergio Marchionne is talking about breaking
the company up, possibly staging a Maserati IPO to follow up on
his successful Ferrari spinoff in 2015.
Needless restructuring, new stories
Ford stock has lagged all
Ford has beaten badysts’ expectations for the bottom line three
quarters in a row in 2017 and has a money-printing machine called
the F-Series pickups, but that didn’t stop Morgan Stanley’s Adam
Jonas — Wall Street’s resident futurist — from
painting Ford as a company in such crisis that it needs to be
Bill Ford’s new policy of tight-lipped-ness isn’t surprising.
Hackett’s job as CEO was to recast Ford’s narrative in a way that
would get the stock up in a market that’s seen indexes hitting
new highs while Ford is actually down over 2% for the year.
That bump understandably didn’t materialize when
Hackett gave a presentation to investors in early October
that was fascinating but also lacking in specifics, beyond
stressing that Ford wasn’t happy with its long-term 6% operating
margin and is planning to undertake some substantial
Bill Ford’s reaction to the still-lagging stock price was to say
that Ford is going to take its toys and go home. The risk for
Wall Street is that Ford might have some pretty cool toys — the
carmaker has nearly $40 billion in cash to spend on new
businesses and acquisitions, and while profits might not be a
healthy as Hackett might like, the pickups and SUVs are going to
keep the money flowing in.
Short-term thinking versus real profits
The F-Series pickups are a
Short-term thinking on Wall Street hasn’t really hurt Detroit’s
core business of building and selling vehicles to global
consumers who, for the most part, have been delighted to buy.
But it has put enormous pressure on management teams, forcing
bankers like Marchionne, engineers like GM CEO Mary Barra, and
deep thinkers like Hackett to pretend that they think electric
cars are going to wipe out the internal-combustion engine, and
that autonomous vehicles are going to end personal vehicle
In this context, Uber’s $60-billion-plus pre-IPO valuation and
Tesla’s unfathomable run-up to a $60-billion market cap on sales
of less than 100,000 cars in 2016 are catastrophes. Detroit has
always dealt in dreams, but the auto industry is closely tied to
facts: if it doesn’t make money and sock in cash to ride out
downturns, it’s in trouble. All the storytelling in the world
can’t alter that.
“This could all go away”
Former Ford CEO Alan Mulally.
A now-retired PR man who spent almost most three decades at Ford
recounted to me a story about Alan Mulally that sums the
situation up very well (I used it for a
book I wrote about Ford that came out this past June).
Mulally explained that from his office in Dearborn, MI, he could
see GM’s headquarters in downtown Detroit and FCA’s in Auburn
Hills. He liked this because he could keep an eye in the
competition, quite literally. But he also did it because he liked
to remind himself that “this could all go away.”
The frustration that Detroit feels toward Wall Street is, to a
degree, reciprocated. Late in an auto sales cycle, with tales of
Silicon Valley “disruption” thick on the ground, investors
desperately want Detroit to play along with the game.
They point to Tesla CEO Elon Musk, who will preside over what’s
likely to be another gigantic quarterly loss on Wednesday and
whose company is struggling to build a mid-size sedan, and they
ask that Ford just talk the talk.
But Detroit isn’t going to do that, and if Bill Ford is to be
believed, Wall Street is going to have to learn to love the