(Repeats story published Monday to widen distribution with no
By David Randall
NEW YORK May 23 Ford Motor Co's
unexpected decision to replace its chief executive officer on
Monday may not be the catalyst that revives its slumping share
Shares of the second-largest U.S. automaker rose 2.1 percent
Monday, a relatively muted reaction given the 0.5 percent gain
in the broad Standard & Poor's 500 index. Over the last
12 months, shares of Ford are down nearly 16 percent due to
concerns of declining automobile sales and the threat of
autonomous vehicles to shrink future demand.
The S&P 500 index has jumped nearly 17 percent over the same
time, while shares of competitor General Motors Co are up
about 8 percent and shares of electronic vehicle pioneer Tesla
Inc are up nearly 41 percent.
“There's just nothing out there that looks like it will get
the stock moving,” said Gary Bradshaw, an analyst at
Dallas-based Hodges Capital, who said that he attended a
luncheon with outgoing CEO Mark Fields about two months ago in
which Fields pressed the portfolio managers sitting around him
about why they were not buying shares in the company.
The change in the company’s leadership does not solve the
structural problems facing the industry, said Bradshaw, who does
not own shares in the company and does not plan on adding them.
"GM is in the same boat. They don't have a car out there
like a Tesla that is getting people excited and saying they need
to buy it," he said.
One significant auto investor who declined to be named said
the CEO change would probably not be a catalyst for the stock.
"The company hasn't kept pace with innovation, and the
sector faces long-term problems," the person said.
At $51 billion, the market valuation of Tesla Motors is
larger than both Ford and General Motors at a time when the
company is not profitable, in large part due to expectations
that it has greater growth potential than its more established
rivals. Ford, which announced plans to cut 1,400 white-collar
positions last week, is expected to look at further significant
cost cuts in the next three to six months, company officials
Ford's lower stock price could also be due to far lower
buy-back spending than GM's, analysts said. Ford's buy-back
spending - net retirement of stock - was $145 billion or $2.6
billion over five years, with the bulk coming in 2014 which was
a one-time buy-back to offset the dilution of both stock that
was going to come onto market from an employee stock ownership
plan and from convertible notes that were due to become
exercisable for conversion to shares.
GM's buy-back spending was $2.5 billion last year and $16.8
billion over five years.
Ford has a dividend yield of 5.5 percent, versus General
Motors of 4.6 percent.
Ford has felt less pressure from outside activists to
undertake efforts to boost its share price, in large part
because the Ford family, which holds nearly 40 percent of the
voting power among shareholders. GM, by comparison, has fended
off calls from well known hedge funds like David Einhorn's
Greenlight Capital, which has pressed the company to split the
Ford's new chief executive, James Hackett, who had been
overseeing its division focused on self-driving cars, has a
reputation as a turnaround artist for guiding changes at
furniture maker Steelcase Inc that helped it regain its
market leading position, though those reforms did not always
Over the 18 years that Hackett oversaw Steelcase as a public
company, the stock fell by more than 55 percent and delivered a
total return, including reinvested dividends of negative 22.3
percent, or an annualized total return under his tenure of
negative 1.54 percent. By contrast, the S&P 500 generated an
annualized total return over the same run of 5.62 percent.
Notably, on both a price and total return basis, Steelcase
underperformed its main competitors like Herman Miller Inc
and HNI Corp by substantial margins on a
Other management changes at the company could be coming as
Hackett attempts to reposition the company for a new era of
electric vehicles and autonomous driving, said Adam Jonas, an
analyst at Morgan Stanley. That could mean that "the earnings
situation may need to get materially worse before it gets
better," he wrote in a note Monday.
(Reporting by David Randall; Additional reporting by Megan
Davies; Editing by Lisa Shumaker)