Ford: Should You Hit the Brakes on This Stock?

November 15, 2024

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Hello Everyone,

Buckle up! This week, we’re diving into Ford Motor Company and the bumps it’s hitting on its road to profitability. For long-time investors, it might feel like the company has been idling, and some are wondering if it’s time to change lanes.

Here are the highlights, followed by some eye-opening charts:

🚗 Ford’s Decade-Long Stall

Since Alan Mulally’s departure as CEO, Ford’s stock hasn’t exactly hit the gas pedal. In fact, it's down around 36%, putting it behind the pack. Mulally steered Ford through the 2008 crisis with his “One Ford” vision, leading the company to record profits. But can current management bring back that momentum?

📉 Ford Stock Performance Since Mulally’s Departure

Here’s a look at Ford’s stock price over the past decade, showing a gradual decline since Mulally left.

🛠️ Recalls, Warranty Costs, and Pricey EVs

High recall and warranty expenses are burning through Ford's cash. In Q2 of this year alone, they shelled out $2.3 billion on warranty-related expenses, $800 million more than in Q1. And if that wasn’t enough, Ford’s electric vehicle (EV) division is currently running at a substantial loss.

📉 Ford’s Quarterly Warranty Costs Over the Past Year

This chart highlights how warranty expenses have ballooned, a worrying trend for any investor.

⚡ Ford’s EV Struggles and the Battery Problem

As Ford pivots to EVs, it’s facing major roadblocks. EV production requires expensive batteries—especially for trucks and SUVs that used to be its cash cows. While EVs are the future, they’re not yet delivering the profit Ford needs. In the first nine months of 2024 alone, Ford’s model-e division lost nearly $3.7 billion in earnings before interest and taxes (EBIT), while its traditional models barely kept the balance sheet positive.

📉 Ford’s Model-e Division Losses vs. Traditional Vehicle Profits (2024)

Let’s visualize just how much the EV division is costing Ford.

🌍 Ford and the China Conundrum

Remember when everyone said China would be Ford’s “second pillar of profit”? Fast forward to today, and Ford is at risk of an exit. China’s domestic brands are miles ahead on EV technology, and they’re dominating a market where EVs account for over 50% of new car sales.

📉 Ford’s Market Performance in China vs. Domestic EV Brands

Check out how Ford’s performance stacks up against China’s EV players.

📈 Holding On to Dividends—but Missing Out?

Ford’s dividend is attractive, but it’s not enough to keep up with the S&P 500’s gains. If you’re in it for growth, this could be a wake-up call.

What’s Next?

Ford has a lot of irons in the fire, but some investors are giving it 12 months to see real progress or they’re moving on. If you’re holding Ford stock, consider diversifying. We’ll keep an eye on Ford’s progress in 2024 and beyond.

Want more insights like this? Stay tuned for your next edition of FridayOwl where we bring you top market stories every week.

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