CEO Jim Farley gets an “A” for his first seven plus months of work.
The reason can be summed up in one word: speed. Farley has rolled out new EVs and plans for other EVs faster than expected. He reversed the previous management’s strategy for batteries and is investing billions in their production. It also provides for new ways to connect and serve all
stock (symbol: F) followed, making investors happy. Ford shares were $ 6.75 on Farley’s first day. Now they are approaching $ 15, a gain of about 120%.
Barron’s recommended the stock at the end of November 2020, believing that new management could improve margins and build a credible EV strategy. Ford’s long-term operating profit margin target is 8%, roughly double the 2019 level. Since our article appeared, Ford stock has increased by around 64%, while the
are both up about 15%.
(GM), benefiting from the same recovery in the post-Covid auto industry, grew by around 33%.
Ford has been particularly busy over the past two weeks. He unveiled his all-electric F-150 Lightning pickup on May 19 and nailed it. The company recently said about 70,000 people had deposited refundable deposits of $ 100 for the vehicle. The app that kills the truck is its ability to provide three days of emergency power for a home. The front trunk – aka “frunk” – serving as a giant cooler isn’t a bad idea either. The price is even more important than the potential for tailgating. The base tab for one Lightning should be around $ 40,000, the same as the next one
(TSLA) Cybertruck and less than the Start Endurance Pickup
With this starting price, profit margins could be a concern for investors. Electric vehicles cost more upfront than gasoline vehicles because batteries and electric motors are more expensive than an engine and a tank of gasoline. Trucks are essential for Ford; they generate most of its profits. The company argues, however, that electric vehicles can be more cost effective than conventional vehicles.
Scale of manufacture is the key to profitability. Ford is aiming for 40% of its sales to come from battery-electric vehicles by 2030. That’s around two million electric vehicles. The Dearborn, Mich., Automaker also plans to capture recurring service sales by connecting its utility vehicles to software and maintenance packages. Plus, a rebate bill just approved by a congressional panel could be a boon to electric vehicles, especially those made in the United States.
Ford believes that controlling battery production will help reduce costs. He announced a partnership with
(096770 Korea) to build facilities that could meet all of its battery needs by 2030.
Still, a lot of hope is anchored in Ford’s stock price. The company now plans to spend a total of $ 30 billion on electric vehicles by 2025, up from a previous target of $ 22 billion. To justify this, Ford will have to sell and service numerous electric vehicles through its existing dealer networks, a major challenge for Farley & Co.
Ford therefore has a long way to go before the race is won. The tenure of a CEO is not a sprint on a quarter-mile drag track. It’s more like the 24 Hours of Le Mans. Farley knows it. He said last Wednesday that it was “showing, not telling, the time for Team Ford”.
He is right. And Ford investors are better off.
Write to Al Root at [email protected]