Wall Street is now calling the shots at the number-two US automaker.
OK, if you go by market cap, Ford isn’t number two. It’s number three, depending on what Tesla is doing (at $US50-billionish, there are days when Tesla is bigger than General Motors.). And that’s the problem.
The resignation of Mark Fields and his replacement with Jim Hackett, who had been running Ford’s Smart Mobility initiative, is a signal that the company and the Ford family members who control it want to reverse a stock-price slide of over 30% during the past three years.
Auto sales in the US and Ford’s profits have surged during this period. But shares have either languished or slid, as investors have become preoccupied with new industry players — Tesla, Uber, Google, Apple — and worried that a seven-year sales expansion is coming to an end.
In response to the news, Ford shares hardly moved in trading on Monday. They were up slightly, just over 1.5% to $US11.05 after a Friday close below $US11.
According to Ford Chairman Bill Ford, Fields’ resignation came quickly. The two men decided it was time for Fields’ to go late last week, following Ford’s annual shareholder meeting, and Hackett got the nod. The former Steelcase CEO has been on the job for only about 72 hours.
His close relationship with Bill Ford and their shared enthusiasm for a futuristic view of Ford’s business suggests that the Chairman and new CEO will be co-running Ford’s efforts to remain relevant, while several executives who worked for Fields will handle the traditional car business.
“If I have any kind of impact in this business, you will not feel the competition on two people,” Hackett said during a press conference on Monday.
Hackett stressed that he sees his role as facilitating greater teamwork and faster decision making at Ford.
Optics that are impossible to get wrong
The optics of this leadership change by the Ford board are impossible to misinterpret. There have been few indications that Fields was on the block, particularly after Ford saw a record profit in 2016 of $US11 billion. The money has continued to roll in, but the stock price has dipped.
That disconnect can’t be blamed on Ford not matching Tesla’s business, which consists of selling all-electric vehicles for an average of $US100,000 a piece. The market for EVs is tiny, and Ford sells as many vehicles in a month as Tesla sells in a year.
Nor can the falling stock price be attributed to pressure from Silicon Valley. Uber has been in crisis for a month, following a series of PR fiascos, and Google and Apple are clearly aiming to dominate in-vehicle technology systems and the Big Data gathered there rather than taking on Ford head-to-head.
Fields is out because he was the otherwise highly successful leader of a hugely profitable company whose stock price fell over 30% after he took over. He knew the risks.
That said, he probably didn’t think that Tesla’s fantastic valuation and Wall Street’s disdain for here-and-now profits would cost him his job.
More from Matthew DeBord:
- Ford won’t split into 2 companies to battle Tesla under the new CEO (F, TSLA)
- Ousted Ford CEO Mark Fields had the impossible job of pleasing two masters (F)
- It’s Wall Street versus Detroit — and with Mark Fields out at Ford, Wall Street is winning (F)
- Spring has arrived, so here’s a step-by-step guide to fixing a scratch on your car
- Take a closer look at Ford’s $US400,000 GT supercar (F)
Get the latest Ford stock price here.
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