U.S. Markets closed

Ford (F) Yet to Reveal Turnaround Plan (Revised)

Ritujay Ghosh

More than a year after taking over at Ford Motor Company F, CEO Jim Hackett is yet to share details of a turnaround plan. Interestingly, a couple of months ago, Hackett had said that it would cost at least $11 billion to restructure the company.

Ford has been struggling for a while. Hackett is yet to come up with a plan at a time when domestic automakers are already reeling under pressure of higher tariffs on vehicles and a declining market for passenger cars in the United States.

Ford’s Woes Increase

Shares of Ford have declined 25.5% year to date, as the company continues to suffer at a time when the U.S. auto industry is already feeling the pressure of President Donald Trump’s tariffs. Analysts believe that Hackett would be aggressively downsizing the company in unprofitable regions such as South America and Europe to cut costs.

Understandably, Ford’s stock will continue to suffer so long Hackett doesn’t share a concrete plan of a turnaround. The automaker recently said that it won’t be moving production of one of its hatchbacks to the United States from China in response to Trump’s claim on Twitter that his taxes on Chinese imports mean that Ford could now build Focus Active in America.

Demand for passenger cars have been declining in the United States for a while now. This made Ford announce in April that by 2022 it would gradually stop selling passenger cars in the United States except for the Mustang. And it’s not only Ford, General Motors Company GM is also planning to eliminate a few of its sedans. Fiat Chrysler Automobiles N.V. FCAU had stopped selling two of its passenger car models in 2016. Fiat has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Ford’s worries don’t end here. The company’s sales in China declined 36% year over year in August. China is the biggest car market and Ford’s declining sales only mean that company is struggling to make a turnaround. Moreover, last week, Ford announced that it would recall 2 million F-150 trucks in North America to address fire and smoke concerns in seatbelt pretensioners. 

Ford Raises Concerns for U.S. Auto Industry

The domestic auto industry is already feeling the heat from trade tensions. Higher tariffs have seen sales of U.S. cars declining in China. Vehicles sales fell 3.8% to 2.1 million units, recording the second straight monthly decline. Although General Motors has stopped reporting monthly sales figures in China, its local partner SIAC Motor said that sales declined at both its joint ventures with General Motors in August.

In July, Fiat Chrysler cut its sales forecast for the year after it missed expectations in the second quarter due to poor performance in China. This has also resulted in a number of companies increasing their vehicle prices. A couple of months ago, Tesla, Inc. TSLA hiked prices of its Model X and S cars in China by 20% each. Also, two other German automakers, BMW BAMXF and Daimler DDAIF, which make cars in the United States and sell in China, have hinted at raising prices.

On the other hand, Ford at that time had said that it won’t hike prices right away, which will most likely shrink its profit margin. Naturally, this will make the ride even more difficult for Ford at a time when Hackett said that it would cost Ford at least $11 billion to restructure the company.

(We are reissuing this article to correct a mistake. The original article, issued on September 12, 2018, should no longer be relied upon.)

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Ford Motor Company (F) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
Bayerische Motoren Werke AG (BAMXF) : Free Stock Analysis Report
Daimler AG (DDAIF) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research