Ford’s new CEO Jim Hackett took it upon himself to complete a 100-day review of the entire company after he began as CEO. The review is nearing completion, and Hackett is expected to shake up the 120-year-old company in a major way.
Ford’s shares are near a two-year low and Hackett was promoted, in part, to help solve that problem. The new CEO hails from the “smart mobility” division of Ford and is expected to bring the that division’s focus on innovation to the entire company. One of the highest ticket items is Ford’s plan for electric vehicles.
Currently, the company does not produce a fully electric vehicle, letting rivals Chevy and Tesla run away with the new market. Ford has committed to spending $4.5 billion on “electrification,” but that could mean many things. According to Adam Jonas, an analyst at Morgan Stanely, the commitment probably means a move into entirely electric vehicles rather than hybrids. Jonas expects Ford to go “all in” on the fast growing technology.
Jonas also expects the new CEO to bring a lot more partnerships to the company. Partnering with some of the big tech companies could allow Ford to efficiently spend the $4.5 billion commitment, focusing on the areas where it can contribute the most value. These partnerships are crucial, Jonas wrote in a note to clients.
“Like many other auto companies, we believe Ford is in a rather difficult position, where if it were to allocate billions of investment to Auto 2.0 (shared, electric, autonomous transport) entirely inhouse, the stock market may deduct at least as much value by magnitude from its market cap,” Jonas said.
These investments in the next generation of cars will likely weigh down the company’s future earnings, said Jonas. Morgan Stanley’s earnings forecast for Ford in 2018 is 40% lower than the average of other analysts.
The future of Ford will be “exciting, but delicate” as it transitions its capital allocation and focus toward electric vehicles. It has a lot of catching up to do, Jonas said.
Ford is down 14.38% this year, and is trading at about $10.77 on Thursday.
- Markets Insider