From Ford’s bad news, good news department:
June 22, 2022
9:21 PM UTC
Reuters headline: Ford sees ‘significant’ job cuts as it picks Spain for EV production
BARCELONA, June 22 (Reuters) - Ford Motor Co (F.N) said on Wednesday it will start producing electric vehicles in Spain later this decade but that would imply “significant” job cuts at its Spanish factory and another one in Germany amid its ambitious electrification push in Europe.
That TOO!
As legacy companies convert to EV, they don’t need so many people to make stuff. That travels up the supplier chain as well.
I retired from Ford in 2010 and took a pension buyout a few years later because I foresaw the likelihood of huge change, perhaps catastrophe for the company… probably hitting around 2030. It still might turn out to be dire like that.
Disclosure: I also figured I could take the lump sum and invest it for superior returns from what the pension guys could do.
Rob
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.
I retired from Ford in 2010 and took a pension buyout a few years later because I foresaw the likelihood of huge change, perhaps catastrophe for the company… probably hitting around 2030. It still might turn out to be dire like that.
I’d love to read your expansion of thought on this paragraph above. And I hope you have invested your money well after leaving $F.
I’d love to read your expansion of thought on this paragraph above. And I hope you have invested your money well after leaving $F. – PT
I worked in Product Development, which means engineering. Oddly to me, I was also the only one I knew who also looked at the company through “eyes of marketing and finance”. Except for a couple rare folks at the top…and I rarely interacted with anyone at VP level or above.
Ford has some cultural issues that tend to cause issues:
They are a follower, often a very late follower.
Innovation is not embraced, but it gets a lot of praise (lol).
Worst… except in rare circumstances when there is an existential threat… the bean counters run the decisions.
Bottom line, you get a lot of mediocrity, you get CHEAP (along with a supplier base that gets beaten up… and unwilling to share innovation), you get poor quality with the preceding… and you get reluctant following of the market in terms of products. Oh yeah… when there IS a good idea, they don’t want to spend the money to keep in front of the industry.
I remember sitting in a half day presentation of future product plans near the end of my career. I could see they were half heartedly moving toward widespread hybrid electrification by the mid-2020s (this is looking forward from 2010)… and TINY engines for the 2010s. Why were they doing it? To meet CAFE standards (fuel economy). I could see their efforts were going to require massive investment with poor financial returns… and the results would be nothing to excite customers based on history.
At the same time, I could see that the non-North America portion of Ford was on a slow fail. Hungry competition around the world (some supported by home governments)… and, again, weak efforts by Ford. I could see the expansion into India would not be successful (half hearted with wrong products). And the Chinese effort would not keep up with the competition. And formerly profitable units in Europe and South America were just not turning around. (Note: Ford, during my working memory, had a 30% market share in the UK. Today, 2022, it’s 7%…not a typo).
What I FAILED TO SEE. I failed to see it was even worse.
Ford is failing and retreating in every non-North American market, despite some level of effort. I expected it to take longer. It’s more of a collapse, IMO. Not as bad as GM though in SA and EU.
Shockingly to me, they have practically exited the market for cars. Pretty much just trucks (crossovers are considered trucks in terms of government standards). If they ever want to get back into cars… good luck. The engineering expertise will not be easy to recover… and the marketplace would probably look askance at Ford cars (for leaving the market as well as quality concerns). Why exit? Two reasons: Profits are too low and capital spending required was needed elsewhere.
I didn’t expect this fast switch to EVs… and Ford almost waited too long. I now think they’ll probably survive, but a lot smaller. But if they ever goof up the F-series trucks, it’ll probably be a quick slide downward… that’s where the money is.
Note: I remember Ford US market share at 24%+. Now half that. In related news, their China share (which they claim is important to them) is just a bit over 1% (not a typo). As you no doubt realize, if a market share for a product drops too low… they lose “share of mind”… people forget you even exist. I bet Ford is nearing that point in China.
Ford is VERY fortunate in one way. They kicked out the old CEO (formerly in charge of a FURNITURE company!) and elevated Farley (related to Chris Farley, by the way). Farley recently stepped up and yanked the company toward EVs. Good thing. The route they were on would have meant a rapid company collapse in not many years.
Now?
Maybe collapse anyway, but they at least have a chance now. I still encourage my old Ford friends to make plans for bad times at Ford. Most don’t see any further than the product programs they’re working on, unfortunately.
Yes, I’ve been quite successful investing the pension buyout. Until November. Despite spending money like crazy (up to 15% of total portfolio assets annually) since 2010, those assets grew to 5X the level I retired with. Unfortunately for me, I held my companies since November. Normally, that wouldn’t be a problem, but I failed to recognize the shift in market sentiment with respect to valuation. Normally, I shift as required. Bottom line, I dropped down to a bit more than HALF what I retired with. Ouch! Now working on rebuilding. Up about 15% or so in the last month… hoping to double that low by the end of 2022. And get back to building up from there. We don’t need the extra money for ourselves but have targets for that money that we want to fund again.
Rob
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.
This was a very informative response, Rob, and it gives me some things to look for as red flags in Ford’s future.
I had no idea Ford’s market share in China was so miniscule. I am assuming they have no factory in China?
And if my assumption is wrong, just how big is that factory over there and where might it be located?
Yeah, I like Farley - a lot. He’s funny in a good way, just like Chris.
If you have any longterm ideas spit 'em out.
Alt-Energy, A/I, Robotics, nano-tech, nuclear fusion and fission, EVs, H2, etc. And I also follow select crypto projects with the caveat that 99+% of them don’t interest me at all and look scammy or light in leadership.
Meanwhile, in EVs, I’m watching this CEO of VW who seems to relish competing with Tesla.
I had no idea Ford’s market share in China was so miniscule. I am assuming they have no factory in China?
And if my assumption is wrong, just how big is that factory over there and where might it be located? – PT
Quite a few in China https://corporate.ford.com/operations/locations/global-plant…
And yeah, the VW chief is moving fast.
Overall, I’ve found investing in auto companies to be quite profitable… if done at the right time. Too many issues for the long term (highly capital intensive, low returns, high governmental touch… that keeps changing). Investing now in TSLA might be OK though (I don’t own any at the moment because buying has to rely on a lot of faith in people willing to pay for what might happen).
If you’re a Seeking Alpha subscriber, I suggest reading up some on OXY. The company financial situation is rapidly improving after an acquisition that was accompanied by some financial drama. Someone holding for a year or two could do fairly well. Some guy in Omaha has been loading up on it for some reason. Ummm… he has a larger position than I do… around 16% of the company right now.
My #1 idea is UPST. Pretty well known company around the Fool. And I think folks are largely focused on the wrong stuff. The right stuff is they are rapidly expanding (despite the economy) and already pulling down respectable EPS. I suspect this is more than a 10-bagger from here if one is willing to wait a few years. Right now, slowly buying. Plus selling options for income… this retiree needs cash from SOMEWHERE to build the portfolio at a reasonable pace! LOL
Rob
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.