It’s no exaggeration to say that American automotive icon Ford (NYSE:F) has gone through one transition after another during the past decade or so. In fact, the company is about to undergo its fourth CEO change since the Great Recession. Frequent turnover at the corporate level should be considered a red flag for F stock traders.
It’s also a red flag that F stock spent a long time going nowhere. In July, I observed that the $7 area seems to have magnetic power for this stock. As of July 14, F shares were still stuck in neutral and making little progress, having closed at $7.04.
That number has barely changed as of today.
Plus, there’s currently no dividend to collect with F stock. Thus, even with the changes going on at Ford, it appears that the company’s shareholders haven’t seen much progress.
Maybe a corporate-level switch-up will spark some much-needed change at Ford, but that remains to be seen. We’ve heard the “change is a good thing” argument before, but the F share price has consistently gone down since 2014. Why would this time be any different?
A Closer Look at F Stock
Believe it or not, the F stock price was higher than $35 in late 1998. The company’s shareholders shouldn’t expect the stock price to reach that level again any time soon.
The medium-term peak was $17 and change in the summer of 2014. Even reaching that level would be unlikely in 2020. Before anything else, the bulls need to wrest control of the price action from the bears.
Prior to the onset of the novel coronavirus, the battle line between the bulls and bears was $10. It’s possible for the bulls to retake that level by the end of 2020. However, they’ll need to show some strength and initiative. A few strong pushes to the upside on heavy volume could do the trick.
An Abrupt Announcement
In a surprise announcement that shook the American automotive sector, Ford announced that CEO Jim Hackett will retire in October. Ford’s COO, Jim Farley, will take Hackett’s place as CEO.
First of all, some folks might question whether Hackett’s departure is truly a “retirement.” Is it possible that discontented board members lost patience with the pace of Ford’s recent restructuring efforts? It’s not unusual for corporate boards to replace CEO’s when they feel that a shakeup might boost the company’s bottom line.
We can speculate all day long, but the frequent change at the executive level isn’t a positive sign for Ford. When Hackett took the CEO position in May of 2017, he was expected to revitalize the troubled automaker. The same expectation was placed on the shoulders of Mark Fields, who preceded Hackett as Ford’s CEO and who also “retired” unexpectedly.
Less Mileage, Less Profits
I’m not the only observer who’s unimpressed with Ford’s latest transition, and with the American automotive market’s recovery in general. Strategic Wealth Partners President and CEO Mark Tepper, for instance, notes, “Vehicle sales overall have been on the decline for years and that was before any of this Covid stuff happened.”
That’s an excellent point as Ford can’t simply blame the coronavirus for all of the automaker’s problems. Tepper further posits that if the if work-from-home trend becomes permanent, we can expect that people will do less driving.
The implication is that people’s cars will last longer, so they won’t need to buy vehicles as frequently. Adding to this thought is Ascent Wealth Partners Managing Director Todd Gordon, who states that “the average lifespan … of cars is up to 11.9 years” as “Technology is allowing these cars to stay on the road longer.”
These trends aren’t constructive for struggling U.S. automakers, and that would include Ford. Frankly, an abrupt executive-level change is the last thing that a troubled American car manufacturer needs now.
The Bottom Line
Ford won’t go bankrupt or anything like that in 2020. However, investors should be cautious when it comes to F stock. There’s a time to buy and there’s a time to wait. And for the time being, while the company struggles through yet another transition, it’s just better to wait.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
