Ford Motor Company (NYSE: F) stock has lagged the market recovery. But with the summer selling season just around the corner and factories restarting production, the automaker could soon be back on track.
Shares of Ford Motor bottomed in mid-March with the rest of the stock market and the recovery has been slow at best, but now with the economy reopening the stock is picking up speed. In the past month alone Ford stock is up about 51%, although it is still down about 21% year to date.
Obviously, sales will be critical to moving the needle for Ford — and this summer could make or break the stock. The company has already begun the phased reopening of its factories, which is promising, but it all comes down to sales.
Auto sales have taken a big hit since the COVID-19 pandemic arrived in late February. While a recovery appears to be in the works, there are still underlying problems that need to be addressed. Also there is the potential for an increase in coronavirus infections as the result of protests across the country. A second government lockdown appears unlikely even if cases spike, but how companies run their own businesses is an entirely different story.
Phased Restart
Ford took a phased approach to the reopening of its factories in North America beginning on May 18. The company is returning roughly 12,000 employees to work to start with. Most of the personnel being returned are those whose jobs could not be done remotely, including those working in vehicle testing and design.
On May 11, parts and distribution centers resumed operations. The primary reason behind this was to support Ford dealerships in providing service to keep vehicles on the road.
Ultimately, the most important aspect of the reopening of these factories and centers was the new safety and care measures being implemented. These include health assessment measures, personal protective equipment (PPE), and facility modifications to increase social distancing.
North American assembly plants that previously operated on three-shift patterns returned to two shifts. Most two-shift plants returned to one shift, and most one-shift plants are continuing to operate on that basis. The Flat Rock Assembly Plant in Michigan and Oakville Assembly Complex in Ontario resumed production the week of May 25 on one shift.
Overall, the ramp-up process will be gradual, as workers adjust to the new health and safety protocols and as Ford’s entire supply chain comes up to speed. The staggered approach allows Ford to effectively implement new safety protocols and provide proper PPE for all employees as they return to work.
U.S. Auto Sales
During the month of May, U.S. auto sales dropped dramatically compared to last year’s numbers, but it wasn’t all bad. Auto sales did show some signs of recovery from their incredible collapse in April. By and large, these shortcomings in sales were the result of government-mandated lockdowns that were lifted in May.
Some of the biggest losers in the U.S. auto sales report were Toyota, Honda and Hyundai, which each saw double-digit drops in sales for the month year over year. Toyota got the worst of it with a 25.7% decline in sales.
As the recovery took hold, the pace of sales increased in May, averaging 12.2 million vehicles on an annualized basis, according to Autodata. April had an annualized sales rate of 8.6 million.
For the most part, analysts were expecting that new vehicle sales would be slightly less than 1.1 million vehicles for the month of May, a decrease of roughly 32% year over year. Although the actual number was better than expected, when annualized it still paled in comparison to the 17 million vehicles that were sold in 2019.
So where does Ford fit in all of this? The company doesn’t release its sales numbers on a monthly basis, but rather on a quarterly basis. However, the numbers give some perspective on the auto industry as a whole. It is unlikely that Ford is far off of what the other major automakers are seeing.
As the restart is underway, Ford has the inventory to meet the demands of picky consumers. Summer sales will be crucial for the company and for its rivals. While all the auto giants took a hit in May, an industry-wide recovery appears to be in the cards.
ALERT: Take This Retirement Quiz Now (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
