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Ford Motor Is Becoming a Tech Company That Makes Automobiles

Ford is exploring many new technologies that could boost Ford stock down the road

Ford stock - Ford Motor Is Becoming a Tech Company That Makes Automobiles

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Ford Motor Company (NYSE:F) is embracing technology, but what car company isn’t? With Ford stock currently at new multi-year lows and the Ford stock price poised to continue moving even lower, Ford is slowly but surely transforming into a tech company that happens to make automobiles.

There’s more to this paradigm shift than may immediately meet the eye, however.

So far neither consumers nor shareholders have clearly seen this transition. The clues are there, though, for those willing to see them.

An Empowered IT Department

Since late last year, Ford’s developmental portfolio has shrunk to an eighth of its former self.

Most interesting is the fact that the projects weren’t killed by CEO James Hackett. They were shuttered by CIO (and former COO of the company’s information technology arm) Jeff Lemmer, who has been empowered by Hackett to not only cut costs but also focus on the most fruitful of projects. While seemingly shrinking the role of IT, Lemmer explained recently that Ford was actually “taking a much stronger point of view as an IT organization,” adding that the new autonomy “shifts IT away from being order takers to being an integral part of creating these projects.”

And the company’s IT unit hasn’t been afraid to use its new-found authority in ways beyond cancelling projects. In July, Ford contracted NASA’s Quantum Artificial Intelligence Laboratory (QuAIL) to do some artificial intelligence work that would ultimately be used in the development of autonomous cars.

Embracing the Power of Technology

And Hackett isn’t merely offloading IT-related efforts to focus on other matters. He’s actually a believer in the power of information technology and its transformative potential.

More than once, but most recently at September’s Bloomberg Global Business Forum, Hackett laid out a three-pronged plan to use technology in a way that would not only enable Ford to catch up with rivals like General Motors (NYSE:GM) and Fiat Chrysler (NYSE:FCAU), but surpass them. The three legs of that plan are electric vehicles, autonomous vehicles and traffic management.

Ford’s Technological Initiatives

Two years ago, Ford unveiled an app called FordPass that helps owners of Ford vehicles remotely start their vehicles, find and reserve parking spaces, and manage their vehicles’ maintenance. It was and still is a solution to a problem that doesn’t entirely exist, and the response to it has only been so-so. The company is maintaining the app, however, if only to maintain a platform that can help launch other tech features as they become available.

In October of last year, Ford acquired a company that makes laser-based radar systems, called Lightwave, to bolster its previous investment in autonomous driving technology developer Argo. Called LIDAR, these technologies are seen by some industry experts as the key to making autonomous cars not just functional, but also safe. These systems can send, receive, and process important data at the speed of light, not only making response times faster, but allowing self-driving cars to process massive amounts of relevant data.

In August of this year, the company spent $740 million to purchase Detroit’s Michigan Central Station in order to use it for the development of things like electric vehicles and self-driving cars.

That’s not a call Lemmer would have been able to make on his own. Hackett and others had a hand in it because Hackett and others recognize the potential of technology. Ford’s chief told Bloomberg that cloud-based traffic-management solutions are an $11 trillion opportunity in and of themselves. If Ford can get even 1% of that pie, F stock would, of course, rally far above its current levels.

The Outlook of Ford Stock

Admittedly, it’s difficult for current and prospective owners of Ford stock to see the shift. The company’s current lineup of automobiles looks an awful lot like its older lineup, albeit with some new technological novelties. Most of its cars aren’t yet “connected,” and none of them is autonomous. Ford also doesn’t sell a great number of electric vehicles, even though the electric Focus is a commendable entry in that race.

Look just a little bit down the road, though, and you’ll see the fruits of the company’s current efforts. A hybrid F-150 pickup truck will debut in 2019, and Hackett just declared that “we now have solutions for cities.” The evolution is coming.

It’s still not clear when, or even if, this evolution will bolster the Ford stock price. But if technology-oriented cars and mobility are the future, Ford is surprisingly well positioned for that future, and Ford stock should respond accordingly.

As of this writing, James Brumley held a long position in Ford. You can follow him on Twitter, at @jbrumley.

Article printed from InvestorPlace Media,

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