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Fields Sets Ford on Dual Track


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From the WSJ:
http://www.wsj.com/articles/ceo-fields-sets-ford-on-a-dual-track-1476696604

For the better part of a decade, “One Ford” served as the battle cry of the No. 2 U.S. auto maker.
The slogan, coined by former Chief Executive Alan Mulally, was shorthand for the painful downsizing and management overhauls that helped Ford Motor Co. avoid bankruptcy and return to big profits.
Now, as the auto industry braces for the rise of electric and self-driving vehicles, Mr. Mulally’s successor, Mark Fields, is pivoting toward Two Fords, recasting the company as an auto maker and a transportation-services provider.

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This whole self driving car thing is just, I dunno, far fetched at best. Once again I say after being in the computer industry basically my entire adult life I'm not getting in a vehicle driven by sensors and computers. No way.

 

I think the folks who are really embracing it think it's as simple as their smartphone, whereas those of us who have IT experience cringe at the thought and wouldn't go near such a vehicle given a choice.

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BT-AL616_TWOFOR_9U_20161017111207.jpg

 

In the article, the Barclay's analyst and the guy who co-manages Jim Cramer's charitable fund have good explanations for the above: Ford's future plans including self-driving automobiles, electrified vehicles, ride sharing, etc. are great. The problem for Fields and Ford as a company is that they're checking a lot of boxes with insufficient attention to making them a cohesive whole.

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Ford's marketshare has grown slower than the industry, and has mostly been flat in a growth market. And Ford's immediate future looks very stagnant if not bleak from the outside looking in, profits and sales are falling and they are giving plenty of warning about their headwinds which the other businesses are not doing. So if investors aren't unimpressed with a Detroit company showing signs of greater than average weakness, than the world has been flipped upside down. Ford has also made allot of announcements about their commitment to next-generation technologies like Electrification and Autonomous Tech, the most perplexing one to investors is Ford's vision as a services company. So right now with Ford facing problems and unclear imaginary future with weakness in China, Ford is a company with allot in limbo.

 

But as an industry watcher, I think Ford's future looks promising from a cost structure perspective. Although they are moving very slowly in key segments, they are doing so in a deliberate way tied to realigning their manufacturing. Ford is not a growth company anymore, it's been as big as it can sustainably get and China is going to be a slow build. Ford wants nothing more than to be sustainable and profitable.

Edited by BORG
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Ford's marketshare has grown slower than the industry,

 

Marketshare is a % of total vehicle sales. The sum of all in the industry is 100%. If Ford has increased, then someone else's has decreased. Ford may grow slower than others in the industry, but Ford can't grow slower than the industry as a whole. If Ford is gaining, then someone is losing.

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And I'd be more concerned if the stock was rising, because the things you have to do nowadays to increase short term stock prices are at odds with long term stability and growth.

 

I watched a 100+ yr old company almost go out of business trying to please the stock market.

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I am hoping ha Ford is trying to conserve now by not trying to prop up older platforms (except where needed immediately). It is going to be very expensive to bring out the new platforms, and realign all the current and future production. Ford may be giving up a bit of market share now, especially on platforms that are old and not likely to steal new customers from the competition anyway, but throwing money at them now, just won't return the investment when they really need it for the new platforms.

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This whole self driving car thing is just, I dunno, far fetched at best. Once again I say after being in the computer industry basically my entire adult life I'm not getting in a vehicle driven by sensors and computers. No way.

 

 

 

 

At a recent real-time Java conference, the participants were given an awkward question to answer:

"If you had just boarded an airliner and discovered that your team of programmers had been responsible for the flight control software, how many of you would disembark immediately?"

Among the forest of raised hands only one man sat motionless. When asked what he would do, he replied that he would be quite content to stay aboard. With his team's software, he said, the plane was unlikely to even taxi as far as the runway, let alone take off.

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At a recent real-time Java conference, the participants were given an awkward question to answer:

"If you had just boarded an airliner and discovered that your team of programmers had been responsible for the flight control software, how many of you would disembark immediately?"

Among the forest of raised hands only one man sat motionless. When asked what he would do, he replied that he would be quite content to stay aboard. With his team's software, he said, the plane was unlikely to even taxi as far as the runway, let alone take off.

 

And flying is soooo much easier to automate than driving.

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Sounds more like a bumper sticker than an actual strategy.

 

That's the issue. Ford's got a lot of good ideas for the automaker side of the business as well as the transportation services side. But since neither side has a unified strategy, Ford ends up being a follower rather than a leader when it comes to actual execution. I think BORG made this point in another thread.

 

For example, the WSJ article says Fields "wants to move straight to offering a fully driverless car" by 2021. That's a great plan. The technologies to make that happen are already here. Why not incorporate some of them like millimeter wave radar, cameras, and sensors into all of Ford's regular cars and trucks well before 2021? Toyota will have a suite of active safety features like automated collision mitigation standard on all of its U.S. cars and trucks by 2018. Just like Ford, Toyota is developing fully autonomous vehicles. But unlike Ford, Toyota has a cohesive strategy in which their work in fully autonomous vehicles complements their existing car business. President Akio Toyoda said "Our goal is to make sure everyone can move around freely."

Edited by rperez817
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To your point, from Automotive News, "Only Ford has grown market share among the big 3 brands, Toyota has lost 1.1% and Chevrolet has lost 4% market share (through September 2016)."

 

Fleet sales enabled Ford to accomplish that. Throughout the first half of 2016, Ford dumped more vehicles into fleets than anyone else. Now the fleets don't have as much to buy in the last two quarters of the year, and Ford sales are trending downward.

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Ford is playing it safe and letting the market decide what they want before committing big bucks and resources. We're seeing that with the electric focus. Outsourced drivetrain using a standard vehicle - very minimal investment but enough to learn something while waiting to see where the market was going. That can work out great for long term market shifts. They can take everything that's been learned with Volt, Bolt, Leaf and Tesla and apply that to their new platform. The danger is if the market shifts too quickly you're always playing catchup and you may not be taking advantage of growing markets as quickly. I think we're seeing that now with small utilities.

 

There is no right or wrong answer really - just depends on your priorities and what else you're investing in at the same time as to which one makes sense for that company at that point in time.

 

We won't know the real answer until we see the new products on the new platforms (C3, CD6). If delaying development of existing vehicles allows them to leapfrog the competition with the new vehicles and maintain profits in the meantime then it's probably a good move. If not then it may be a mistake.

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Fleet sales enabled Ford to accomplish that. Throughout the first half of 2016, Ford dumped more vehicles into fleets than anyone else. Now the fleets don't have as much to buy in the last two quarters of the year, and Ford sales are trending downward.

 

Ford does not do fleet "dumping" any more. Fleet sales are disciplined and very profitable. Ford has always said that fleet sales were front loaded each year and they plan for that. Analysts and others who think that's a problem don't understand the business.

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Ford does not do fleet "dumping" any more. Fleet sales are disciplined and very profitable. Ford has always said that fleet sales were front loaded each year and they plan for that. Analysts and others who think that's a problem don't understand the business.

do you have source for this?

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It's common knowledge. I'm not going to go hunt down press releases.

 

If he was really wanted to know, it'd be as easy as looking at sales data for the year.

 

Ford sells to fleets...they aren't dumping unwanted product into rental fleet market and depressing resale values because of that....like the Big 3 did 15-20 years ago.

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Ford has a large commercial fleet business, it's actually an important tentpole to their business with F-Series, SuperDuty, and Transit vans...Not to mention Explorer and Taurus PI. So yes Ford looks like a fleet dumper, but it's not the bad kind. Ford has a very inconsistent grasp of other areas of the retail business but their fleet business has always been rock solid.

Edited by BORG
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I am hoping ha Ford is trying to conserve now by not trying to prop up older platforms (except where needed immediately). It is going to be very expensive to bring out the new platforms, and realign all the current and future production. Ford may be giving up a bit of market share now, especially on platforms that are old and not likely to steal new customers from the competition anyway, but throwing money at them now, just won't return the investment when they really need it for the new platforms.

 

Their major platforms are in the process of being replaced. Focus/Fiesta will be new, CD4 is still new (and perhaps going to be replaced with some form of CD6 in a couple of years). The trucks are new, and Mustang's future platform is debatable (whether it continues to upgrade or is part of some CD6 adaptation). The only one that falls close to the "propped up" category would be D4 upon which Taurus, Flex, Explorer, MKT, PI, and PIU ride on, though Explorer has saved that platform. And even that one we know the replacement is on the way, and D4 is only around until the replacement is ready.

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do you have source for this?

Q1 result.

 

Ford Delivers Best Quarter Ever with First Quarter Pre-Tax Profit of $3.8 Billion; Income of $2.5 Billion

 

North America - $3.08 Billion Pre-Tax Result.

 

*North America had best quarter ever pre-tax profit of $3.1B, up $1.5B, with a record operating margin of 12.9%
*Market share improved in North America and the U.S. driven by strong fleet sales of the SUV line-up, Transit and F-150
*Pre-tax profit improvement was driven by favorable volume and mix, reflecting the full availability of the product portfolio
after the successful launch of F-150 in 2015 and the strength of our SUV product line up
*For 2016, expect pre-tax results to be about equal to 2015 with an operating margin of 9.5 percent or higher
Now, n the midst of the most heavily fleet laden quarter, Ford pulls profit and margins like that,
it's simply not possible for Fleet sales to be anything other than profitable, there's nowhere to hide...
Edited by jpd80
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