Ford's Plan to Turn Itself Around

With its share price at a 52-week low and U.S. sales down 2.1% year over year for the first nine months of the year, Ford Motor Co. (NYSE: F) needs to find a fix. At its national dealer meeting this week in Las Vegas, Ford executives revealed their plans to turn the venerable automaker around.

It might be a little late in coming. This morning Ford stock was downgraded from Overweight to Equal Weight and the price target was cut from $14 to $10 at Morgan Stanley. The firm noted that a lack of restructuring progress is accompanied by a lack of confidence from the investing community and capital markets. JPMorgan also cut its target from $14 to $13 in a rival call.

The crux of the plan calls for the company to focus more on keeping existing customers rather than trying to grow share by attracting customers of competing brands. Ford will concentrate its marketing efforts on keeping customers loyal to the Ford brand by communicating with them more often through connected vehicles and creating a new loyalty rewards program on its FordPass app.

The connection to customers will come through modems the company plans to install on all its nameplates over the next few years. That approach has worked pretty well for Ford’s luxury Lincoln brand and the company is hoping to repeat that success with its other vehicles.

The goal, according to a report in Automotive News, is to boost North American profit margins to 10%. President of global markets, Jim Farley, said:

If you start to see our North America margins go up, we have no new product this year, and it’s not coming from the market. It’s controllable within our company.

Farley noted that the company has discovered that its profit margin on a given model varies by region. Now the company is allocating more inventory to those regions where the returns are best.

Some dealers were concerned earlier this year when Ford said it would stop producing nearly all the company’s passenger cars for the U.S. market. Dealers wondered why Ford would willingly abandon the entry-level sedan market to GM, Toyota, Honda and others.

The company tried to quell those fears this week by promising to offer “several vehicles” in the sub-$25,000 entry-level market. Ford also said it plans to increase its number of nameplates by three new models by 2023.

One of those new models will be the Bronco, a sport utility vehicle the company produced for about 30 years before calling it quits in the mid-1990s. The new Bronco, scheduled to be added to the company’s portfolio in 2020, will be a midsize SUV, unlike its 1990s forbear that was built on an F-150 full-size pickup frame. The original 1960s version was what would now be called a compact SUV.

Ford shares hit a new 52-week low of $8.19 just after Friday’s opening bell. The prior 52-week range was $8.50 to $13.48, with that low posted on Thursday. The stock’s 12-month price target was $10.17 before this morning’s announced cuts.

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