Investors wonder if Ford CEO change will help revive stocks
new york — Ford Motor Co’s unexpected decision to replace its CEO on Monday may not be the catalyst that revives its slumping share prices.
Shares of the second-largest US automaker rose 2.1 per cent on Monday, a relatively muted reaction given the 0.5 per cent gain in the broad Standard & Poor’s 500 index. Over the last 12 months, shares of Ford are down nearly 16 per cent due to concerns of declining automobile sales and the threat of autonomous vehicles to shrink future demand.
The S&P 500 index has jumped nearly 17 per cent over the same time, while shares of competitor General Motors are up about eight per cent and shares of electronic vehicle pioneer Tesla are up nearly 41 per cent.
“There’s just nothing out there that looks like it will get the stock moving,” said Gary Bradshaw, an analyst at Hodges Capital, who said that he attended a luncheon with outgoing CEO Mark Fields about two months ago in which Fields pressed the portfolio managers about why they were not buying shares in the company.
The change in the company’s leadership does not solve the structural problems facing the industry, said Bradshaw. “GM is in the same boat. They don’t have a car out there like a Tesla that is getting people excited and saying they need to buy it,” he said.
One significant auto investor who declined to be named said the CEO change would probably not be a catalyst for the stock. “The company hasn’t kept pace with innovation, and the sector faces longterm problems,” the person said.
At $51 billion, the market valuation of Tesla Motors is larger than both Ford and General Motors at a time when the company is not profitable, in large part due to expectations that it has greater growth potential than its more established rivals. Ford, which announced plans to cut 1,400 white-collar positions last week, is expected to look at further significant cost cuts in the next three to six months, company officials told Reuters.
Ford’s lower stock price could also be due to far lower buy-back spending than GM’s, analysts said. Ford’s buy-back spending — net retirement of stock — was $145 billion or $2.6 billion over five years, with the bulk coming in 2014 which was a one-time buy-back to offset the dilution of both stock that was going to come onto market from an employee stock ownership plan and from convertible notes that were due to become exercisable for conversion to shares.
GM’s buy-back spending was $2.5 billion last year and $16.8 billion over five years.
Ford’s new chief executive, James Hackett, who had been overseeing its division focused on selfdriving cars, has a reputation as a turnaround artist for guiding changes at furniture maker Steelcase that helped it regain its market-leading position, though those reforms did not always benefit shareholders. — Reuters