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Ford Shares Plunge on Bad News About Recalls, Europe

But maker insists it is “well-positioned for long-term.”

by on Sep.30, 2014

Ford CEO Mark Fields, shown with the 2015 Edge, insists the maker's long-term prospects are solid.

Investors took a dim view after being given an inside look at Ford Motor Co, the maker acknowledging that its European turnaround will be delayed, while it expects to run up big losses in South America, as well – with earnings taking taking another $500 million hit due to recent recalls.

Ford shares closed Monday at $15.11, down about 7.5% on nearly three times the normal volume on the New York Stock Exchange, investors having to balance the maker’s short-term problems against the more upbeat, long-term potential outlined by new Ford CEO mark Fields and his top management team.

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“Our long-term plan underscores the commitment we have to our One Ford plan, while accelerating our pace of progress, delivering product excellence and driving innovation in all areas of our business,” Fields said during a presentation to automotive analysts dubbed Ford 2020. “We remain completely focused on offering customers the freshest lineup of world-class vehicles to meet their needs.”

The maker is launching a record 23 vehicles this year, including critical models like the 2015 Ford Mustang and an all-new F-150 pickup. The latter model is made of aluminum, rather than traditional steel, a shift that will save as much as 750 pounds per vehicle – and improve fuel economy substantially. Ford announced during the conference that it also will move to aluminum for the next generation of its heavy-duty pickups.

“Lightweighting offers a once-in-a-lifetime chance to conquest” new buyers who might own rival trucks, said global sales and marketing director Jim Farley.

(Ford expected to show weak September sales. Click Here to find out why.)

During the presentation, Ford projected its annual sales will grow as much as 55% by 2020, to approximately 9.4 million. It also expects to see margins climb to around 8% by decade’s end, with a long-term target of reaching as much as 9%.

But it’s the short-term worries that sent traders scurrying to sell of their Ford holdings.  It anticipates earnings to fall from $8 billion in 2013 to just $6 billion this year due to a variety of problems.

Car sales in Russia are expected to be down by nearly a third this year as that country’s economy feels the brunt of sanctions related to its role in the Ukranian revolt. That will delay the long-awaited turnaround of Ford’s European operations, according to Ford’s European sales chief Stephen Odell.

Ford also is facing serious problems in South America, where it is likely to post a substantial loss.

Meanwhile, last week’s big airbag recall – covering 850,000 vehicles sold in North America – should result in a $500 million slam to the bottom line, Ford warned.

(For more on that recall, Click Here.)

But company officials insisted the current problems are likely to be short-term, Chief Financial Officer Bob Shanks asserting that, “Although we face a variety of challenges as we approach 2015, we are well positioned for long-term growth in all areas of the business.”

The CFO declared that Ford is on track, if delayed slightly, in its bid to turn things around in Europe. And it will continue to gain momentum as it pushes forward with its product program, another 16 new models coming to market in 2015.

(Saleen bumps the new 2015 Ford Mustang to 640 hp. Click Here to check it out)

Ford is looking for a rebound in 2015, earnings projected to reach the $8.5 billion to $9.5 billion range — with all five automotive regions improving on 2014 results.

For the moment, however, it’s the bad news that investors appear to be focusing on.

(Joe Szczesny contributed to this report.)

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4 Responses to “Ford Shares Plunge on Bad News About Recalls, Europe”

  1. veh says:

    This is a good illustration of why the stock market is such a farce. The total emphasis on short term thinking, and CEO’s given “metrics” to improve share price, makes for poor decision-making. Investors aren’t “investing”–too many banks and brokers looks for that quick gain instead of taking a longer view.

    Ford is lucky that the family owns so much of the company. Others aren’t so lucky.

    • Paul A. Eisenstein says:

      Agreed, Veh, at least to a point. Detroit decision-making has all too often been a knee jerk response to traders with no real tie, or even interest in, the company. But, at the other side of the argument, management should not be ignoring legitimate shareholder needs, either. Ford IS lucky, in this instance, to have a little ore breathing room. And, in the end, a bunch of problems in 2014 will be largely forgotten if things start looking solid in 2015, as Fields and company are promising,

      Paul A. Eisenstein

  2. Jorge says:

    Actually all major auto makers are going to be in a constant “recall mode” from now on as the unfair Toyota NHTSA fines and the GM ignition switch deal has illustrated. In reality there should be a price (i.e. FINES) to manufacturers for selling products with numerous defects beyond reason.

    Wall Street has been a rumor mill for at least the past 50 years. The stock price is rarely ever based purely on financials. For those who don’t know the markets are computer manipulated daily for windfall profits by entities who control millions of shares in major corporations. If you don’t know how to play the game, stay away from the stock markets.

    While a major corporation has an obligation to deliver a reasonable return on a stock holder’s investment, the company itself should be managed for the best overall interest of the company and it’s employees. Anything less is unscrupulous.

    As an investor it’s up to you to purchase stock in companies that you have properly researched who share your moral, ethical and business values. Trying to change a companies’ operating philosophy so that you or others can enjoy excessive short term profits is problematic and unacceptable to most people.

  3. heyfred3000 says:

    The stock market is very much like the automobile market – there are some fundamental mechanics which should keep you away from some products, but for the most part, psychology rules. However, with a few exceptions (often Fords! c.f. Ford GT, 50th Anniv. Mustang) one is a depreciating asset and one is an investment, and the psychology that makes them attractive is very different. So you have to keep in mind that to do well in either market, you ANALYZE how others FEEL.