- Ford investors have been in a world of pain as the company continues to bleed money amid the coronavirus pandemic.
- The automaker just released first-quarter earnings figures, and the results are a trainwreck.
- Ford’s overpaid management team is running the company into the ground. And it’s time for a change in leadership.
Once a respected pillar of the American automotive industry, Ford Motor Company (NYSE: F) has become a pathetic shell of its former self. The company is losing ground in every major market as it competes to stay relevant in an increasingly competitive automotive landscape.
Ford recently released its first-quarter earnings results, and the numbers were even worse than expected. It lost $2 billion in net income, and EPS is negative $0.50.
Management blames its bad quarter on the coronavirus, but the company’s problems started long before the pandemic. In reality, Ford’s overpaid and incompetent leadership is the biggest obstacle to its success. And it’s time to replace CEO Jim Hackett.
First Quarter Results
Ford had a net loss of $2 billion and an EBIT loss of $632 million. Revenue fell 15.8% to hit $31.34 billion, which is $390 million lower than expected. And EPS was $0.50 per share, which is $0.41 less than expected. Despite generating a huge amount of revenue, Ford struggles to earn profits because of its razor-thin margins and failed product launches.
Management blames the first-quarter trainwreck on the impact of the coronavirus pandemic, but the real issue is much closer to home.
Ford was in trouble long before coronavirus. According to the Detroit Free Press, the company paid more in executive compensation than it made in net income for the full year of 2019. Ford’s management team made a fortune that year despite the botched launch of the new Ford Explorer SUV, which was plagued with defects and ended up costing the company over $1 billion in warranty costs alone.
In total, Ford executives pocketed $70 million in 2019 despite only generating $47 million in income for the year. The biggest winner has been Ford’s CEO Jim Hackett who made a staggering $17.4 million in 2019, a full 157 times more than the median employee.
Is Hackett the Problem?
Some investors blame Ford’s troubles on its management–particularly Jim Hackett who took over in 2017. Hackett is the mind behind Ford’s disastrous restructuring program, which has seen the company lay off thousands of employees around the world and discontinue several beloved automobile brands like the Taurus and Focus.
Despite the ruthless cost-cutting and layoffs, Hackett’s restructuring plan is yet to show results. Ford’s profit margins remain razor-thin, and revenue continues to collapse in key markets.
GMFORD11, a commenter on the retail investing hub, SeekingAlpha, had this to say about Ford’s controversial CEO:
CEO is a complete moron. Worst in the industry. Bill Ford just as stupid for not getting rid of him.
Greenchief, another retail investor, thinks the Ford family needs to take even more drastic actions to turn the company around:
The CEO needs to go ASAP and let Farley see what he can do. If nothing, the Ford family needs to orchestrate a full merger with VW.
A Volkswagen merger would be a gift for Ford investors. But it is unclear if the German company would be interested in absorbing Ford’s low-margin, cash-burning business. Anti-trust regulators and lawmakers in the U.S would also try their best to stop the deal–if only to prevent the mass American layoffs that would surely follow.
What is more likely, however, is that Jim Hackett will be the final victim of his own restructuring.
According to David Whiston, an auto analyst at Morningstar, it’s only a matter of time before Hackett is replaced with a more competent CEO. And Jim Farley, the current COO, is poised to take the job as soon as Hackett gets the boot.
Farley previously served as the president of Ford’s New Business, Technology, and Strategy division. And before that, he is credited for helping to turn around Ford’s European business when he worked as its CEO from 2015-17. If he can’t fix the company, perhaps no one can.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment advice from CCN.com.
Last modified: September 23, 2020 1:54 PM