Unlike General Motors, Ford has been very slow in taking forward its autonomous and electric vehicle programs, considered to be the next big thing in the automobile industry across the world. The efforts of Fiat Chrysler to ramp up its SUV and truck segments paid off last month when the company achieved sales growth, even when its pees remained in the negative.
The auto industry is facing multiple challenges and its leading players are revisiting their strategies to stay relevant
A section of analysts is bullish about Ford’s long-term prospects and ability to create value for investors, considering the extensive restructuring program the auto giant announced recently. The initiative, which also involves a reduction in the number of vehicle models and job cuts, is expected to enhance profitability and streamline operations. According to them, shareholders can continue to bet on the company’s stable dividend structure and goodwill.
That the stock price is at a historic low gives room for a reasonably strong bounce back any time now. If that is the case, it will be unwise to miss the golden chance. However, the thriving used car market and tariff headwinds caused by the US-China trade war continue to pose a threat to the entire auto industry, dampening hopes for a meaningful turnaround in the foreseeable future in the case of Ford.
The management needs to come up with a model that helps Ford think beyond its US-centric operation and go deeper into international markets so that it will stay resilient to regional economic issues. The dismal performance in the overseas markets in recent quarters, especially in China and Europe, has been a cause for concern. Also, it is desirable to have sufficient focus on cost reduction while implementing the revamp, considering the mounting expenses that eat into the company’s profits.
Ford shares opened at $9.15 Friday, marking a 30% decline since January. The last time the stock hit such lows was nearly a decade ago. Meanwhile, General Motors gained modestly during that period but remained sharply below the long-term average.
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