Investors skeptical Ford move will boost shares
CEO replaced
NEW YORK, May 23, (RTRS): Ford Motor Co’s unexpected decision to replace its chief executive officer on Monday may not be the catalyst that revives its slumping share prices.
Shares of the second-largest U.S. automaker rose 2.1 percent Monday, a relatively muted reaction given the 0.5 percent gain in the broad Standard & Poor’s 500 index. Over the last 12 months, shares of Ford are down nearly 16 percent 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 percent over the same time, while shares of competitor General Motors Co are up about 8 percent and shares of electronic vehicle pioneer Tesla Inc are up nearly 41 percent.
“There’s just nothing out there that looks like it will get the stock moving,” said Gary Bradshaw, an analyst at Dallasbased 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 sitting around him 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, who does not own shares in the company and does not plan on adding them.
“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 long-term 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 whitecollar 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.
Continued from Page 32 The product provides exposure to US dollar conventional bonds and sukuk with a weighted average portfolio rating of A- minus and above.
Mohammed al-Hashemi, executive director at Invest AD Asset Management, said increased GCC bond issuance across a range of ratings and maturities in the past year had broadened the market.
“This in turn will encourage innovation and the creation of a wider variety of financial instruments and structured products, from a variety of issuers, with regional fixed income as the underlying asset class,” he said.
Hashemi said Invest AD’s new product was also spurred by regulatory change in the GCC. In the UAE, for example, rules issued in early 2015, and now being implemented gradually, limit exposure of insurers’ balance sheets to various asset classes.
“Insurance companies will be shifting towards higher-rated bonds which have lower capital charges under the new regulations. Some insurers we speak to want to divest some of their BBB-rated bonds in favour of instruments rated in the A range,” said Mujkic.
Mohammed Ali Londe, assistant vice president for regional insurance at Moody’s, said GCC insurers were smarting from 2015, when plunging oil prices triggered a tumble in local equity markets that damaged their balance sheets.
Now, “the abundance of issuance from sovereigns and corporates has given insurers a pool of assets in which to invest which simply wasn’t available before,” he said.