Ford's New Strategy: 5 Takeaways From Top Auto Analyst


Jim Hackett's first strategic plan as the new CEO of Ford Motor (F) received a mixed response from industry analysts Wednesday, while investors are sending rival General Motors' (GM) shares to fresh highs.

XAutoplay: On | OffHis roadmap, which was unveiled late Tuesday, is underpinned by $14 billion in cost-cutting over the next five years. That is accompanied by more investments in trucks, SUVs and electric cars as Hackett seeks to put the company's past troubles behind it.

But Adam Jonas, an equity analyst at Morgan Stanley who attended the CEO's strategic update, came away unimpressed overall.

  • Hackett's plan was "very light on details," Jonas wrote in a note, which reiterated an underweight rating on Ford stock. Jonas has a price target of 9.
  • The new roadmap also left little question in Jonas' mind that 2018 profit guidance faces risk of a downward revision. Ford has said it will deliver that guidance in January.
  • Most of the touted cost-cutting is likely to be funded by suppliers.
  • The focus on "extremely high-level strategic objectives," such as electrification, suggests that uncertainty remains on key issues, Jonas added, such as whether ride-sharing firm Lyft is a partner or competitor.
  • Ford has an opportunity to obtain more liquidity "to de-risk the transition plan during a highly uncertain economic time," Jonas concluded, noting that Ford's bonds have rallied in recent weeks, which could give the automaker financial flexibility as it deals with over $140 billion of gross debt.

Ford stock rose 0.3% to 12.38 in afternoon trade on the stock market today. Shares are forming a first-stage saucer base with a 13.37 buy point and have rallied for more than six straight weeks. GM rose 1% to 43.88, putting the stock near profit-taking sell territory following its Sept. 1 breakout. Fiat Chrysler (FCAU) dipped 0.5%. Tesla (TSLA) added more than 2%.

IBD'S TAKE: GM stock shows rising relative strength, a positive technical sign. It also has cleared this key benchmark.

Other analysts echoed some of Jonas' reactions.

Jessica Caldwell, executive director of industry analysis at Edmunds, called Ford's decision to move investment away from passenger cars toward trucks and SUVs the right strategy.

But she found the "high level" discussion around electrification — which the nation's second-largest automaker sees as a growth driver going forward — lacking.

"It seems as though there is still some question around the company's exact plans when you consider the very specific commitments given recently by other automakers and global governments," Caldwell said.

Efraim Levy, an equity analyst with CFRA, reiterated his buy opinion on shares of Ford and applauded Hackett's intention to achieve "a thus far missed target of 8.0% in automotive operation margin," with deep reductions in materials and engineering costs.

But Levy added: "Revenue targets, where Ford has not delivered satisfactorily, were not clear to us in a rapidly shifting automotive market."

David Whiston, a sector strategist at Morningstar, was more upbeat, raising his price target on Ford by a buck to 15 and saying he remains optimistic about the company's long-term prospects.

He also cheered Ford's announcements regarding battery electric vehicles and autonomous vehicles, noting it has lagged in this area.

"Ford has some catching up to do, as GM confirmed this week that it will have its own ride-hailing service and will be driving autonomously in just a few quarters from now," Whiston wrote. "GM also will have at least 20 BEVs (battery electric vehicles) launching by 2023. We have long felt Ford was behind in BEVs, and information released this week confirms our view, but we think it will be more aggressive going forward and can remain a top player as the world moves to BEVs."


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