Ford Motor Co. has something big to prove this week: hoping to maintain the $100 billion market value: a threshold it crossed for the first time last week.
The automaker was long a Wall Street laggard, a fact that contributed to a series of management shake-ups during the last six years. In 2020, Jim Farley ascended the throne and is getting credit for the fire that has been lit under Ford shares.
In the last 12 months alone, Ford stock is up more than 150% and most industry analysts are looking for further gains. Much of the credit goes to the strong reception the automaker is receiving for its accelerated electrification program. If anything, it is struggling to meet surging demand for the Mustang Mach-E and recently said it would double production capacity for the F-150 Lightning pickup due to strong initial orders.
“Farley was the catalyst that unleashed the intellectual diamond that Ford is,” said Joe Phillippi, CEO of AutoTrends Consulting. “He’s determined to win. He has Tesla in his sights and while Ford probably isn’t going to destroy it, it’s going to give (Tesla) a hell of a fight.”
An all-time high follows years of turmoil
Wall Street took a break Monday for the Martin Luther King Jr. holiday. At Tuesday’s opening bell on the New York Stock Exchange, Ford shares stood at $24.89, giving the company a market capitalization of nearly $100.7 billion. Exactly one year before, its shares were barely into double-digit territory, at $10.02. That itself was something of a turnaround, the stock dipping to a mere $4.24 low on April 3, 2020.
Ford has a history of riding the Wall Street roller coaster. It rebounded sharply from the Great Recession, the only one of the Detroit Big Three automakers to avoid bankruptcy and a requisite federal bailout. But it started to slide even before once-heralded CEO Alan Mulally stepped down in 2014. And his hand-picked successor, Mark Fields, couldn’t find the necessary spark to win back the confidence of investors.
CEO Fields was booted mid-2016, replaced by Ford board member Jim Hackett. But while the former Steelcase Chief Executive was billed as “totally cerebral,” said analyst Phillippi, “he didn’t know how to execute.”
Farley steps up
Farley, a one-time Toyota executive, wasted little time when he took over as CEO on Oct. 1, 2020. In fact, he had already promoted major changes in Ford’s electrification push. The automaker had been reluctant to take a leading role. And while it was finally developing its first long-range battery-electric vehicle, original plans called for it to be a bland “compliance car” likely to find little demand outside of California, America’s EV capital.
Instead, Ford shook up the program and created a sporty, high-performance model that became the first brand extension of the familiar Mustang “pony car.” The Mustang Mach-E was named North American Utility Vehicle of the Year in January 2021, among other sobriquets. And Ford has been racing to meet surging demand ever since.
The carmaker appears to have a second winner coming with the all-electric F-150 Lightning set to launch production in June. Earlier this month, Ford said it would double production capacity and likely still will have to push into 2023 to meet existing reservations.
Blue Oval City
Last September, Ford won more praise for its plan to build a 6-square-mile EV manufacturing complex, dubbed Blue Oval City, outside Memphis, along with three battery plants able to provide power for about 1 million BEVs.
“I’m proud the company is getting recognized for our commitment to electrification,” Farley told Automotive News last week. “The market is saying we like this Ford move into battery-electric and we have more confidence in the delivery of the base business. We like that they’re moving now to scale while others are years away.”
That might be taken as a bit of an overstatement. The industry, on the whole, is racing to electrify. Tesla currently has a strong lead, though Ford last year pushed past archrival General Motors to become the No. 2 seller of BEVs in the American market. But GM has an array of products coming in 2022 and 2023 and, based on current plans, would have substantially more all-electric vehicles — at least 30 — in production than Ford by 2025.
Ford has more on the way, though it has been more reluctant to disclose specifics. “Although I’m extremely thankful for the recognition of the team’s hard work, in my mind, we’re just getting started,” Farley told the trade publication.
Plenty of challenges ahead
There are plenty of challenges Ford will face if it hopes to simply maintain its current stock price, never mind continue its recent gains.
The automaker has an unfortunate history of early production hiccups, something that crippled the launch of models like the latest Explorer SUV a couple years back. It will have to execute the rollout of the F-150 Lightning flawlessly, observers have stressed, even while relying on an all-new plant with some radical new production methods.
Among other things, the facility relies on automated guided vehicles to move partially assembled pickups, rather than a conventional assembly line.
Then there’s the challenge of staying on top when it comes to battery chemistry. Ford is spending $7.7 billion on its new Memphis complex and two battery factories in Kentucky.
Battery partner SK Innovation is kicking in another $4.4 billion. They’re focusing on conventional lithium-ion battery technology.
But operations will begin mid-decade, about the time when rivals like Toyota and Nissan are hoping to come out with next-gen solid-state batteries that could change the BEV game.
Dealers could be the glitch
More immediately, Ford is worried about headaches its dealers are creating. Like most automotive retailers, they’ve struggled with supply shortages and have largely abandoned traditional discounting as customers line up for whatever products they can find. But there have been widespread reports about retailers tacking on thousands, even tens of thousands, of dollars in “additional dealer markups” on the Mach-E and Lightning. And Ford insiders tell TheDetroitBureau.com they’re concerned this could scare away potential customers.
Legally, Ford cannot order dealers to stick to MSRP prices but “we can adjust allocations,” a senior official told TheDetroitBureau.com on deep background. By squeezing limited supply for greedy retailers, Ford hopes to bring them back in line.
Getting its second all-electric model into the field with the minimum of problems and the maximum of deliveries, analysts agree, will be a critical part of the formula to keep Ford stock climbing.