24/7 Wall St. Insights
- Ford Motor Co. (NYSE: F) stock is down because investors understand it is the world’s most poorly run large car company.
- Also: Dividend legends to hold forever.
The stock market has experienced a frightening collapse over the past few days. Most of the drop is due to what are now called overvalued mega-cap tech companies. There are a few exceptions as investors move to less volatile stocks. At the top of this is Ford Motor Co. (NYSE: F), whose shares have fallen 22% in the past month, while the S&P 500 has fallen by 2%. (Tesla Inc.’s (NASDAQ: TSLA) shares are down 10% over the same period.)
Ford’s stock is down because a broad group of investors understands it is the world’s most poorly run large car company. Its warranty and recall costs were $2.3 billion, $800 million more than in the first quarter and $700 million more than a year ago.
Since the worst of the COVID-19 pandemic, Ford has made many mistakes. The primary ones are related to the $30 billion it planned to invest in electric vehicles (EVs). Most of the investment was in the name of catching Tesla, which, although much smaller than Ford in revenue, has a market cap almost 10 times that of America’s number two car company. Ford is losing $50,000 on each EV it sells.
Ford has rapidly retreated from its EV ambitions, understanding that gasoline-powered vehicles drive its short-term profits and may for much longer. Ford’s launch of an EV version of its best-selling F-150 pickup has been a dismal failure. The same is true with its Mustang Mach-E. Ford management now says the key to EV success is a profitable $25,000 EV. Despite management’s argument that it can offer one or more of these models in two years, it has no path to build one.
Ford’s stock is down so much for one reason. Management and the Ford family are wrecking the company.
See the Market Share for EV Brands in the US
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