Ford Motor Company (F)  

​Ford fuels up to power into future of driverless cars

Kevin Dobbs | FlashRatings | Wednesday, September 14, 2016 6:14 PM EDT
Ford Motor Co. (F) on Sept. 14 unveiled plans for long-term investments in electric and self-driving cars — moves that it hopes will bolster profits in coming years after expected earnings declines this year and in 2017.

The second-largest U.S. automaker — behind General Motors Co. (GM) — said it would invest $4.5 billion to develop 13 new electric-powered models by 2020. That would represent 40% of its lineup. New models are in the works across a range of segments, from SUVs to commercial vehicles, executives said in a release accompanying the company’s investor day in Dearborn, Mich.
Ford said sales of electric vehicles are expected to outstrip conventionally powered cars and trucks by around 2030, giving it a sense of urgency to push for a market-leading position.

Ford and other automakers see a future in which more people forgo car ownership and take advantage of ride-share offerings. Fleets of these autos could prove most efficient, and therefore profitable, if powered by electricity.

Ford also doubled down on a previous pledge to develop an autonomous vehicle by 2021. Ford said such vehicles — self-driving or robotically guided cars — could make up a fifth of sales by 2030, with demand initially driven by ride-sharing services such as Uber.
“The world is moving from simply owning vehicles to owning and sharing them,” Ford President and CEO Mark Fields said in the statement. “That’s why we are expanding to sell more vehicles and provide transportation services at the same time.”

While Ford continues to produce strong profits on robust demand for trucks and SUVs, its 2016 earnings are likely to get bruised by economic sluggishness in China and parts of Europe, as well as a costly recall of about 2.4 million vehicles with defective door latches.

The company has forecast operating income of $10.2 billion this year, down from a company-record $10.8 billion in 2015. Income next year is expected to dip again, in part because of the newly announced investments.

But Ford expects income to rise again in 2018. And it said that once its new high-tech endeavors are rolled out, the emerging businesses should deliver operating margins of 20% — more than double what sales of the average current model produces.

Analysts did not immediately react to the investor day news with ratings changes. Analysts at Bank of America Merrill Lynch on Sept. 14 maintained their “neutral” rating on Ford with a target price of $14, saying the company’s “strategy to remain competitive in the evolving industry appears solid.”

But investors have been cautious on the stock. Shares declined 1.94% to $12.14 on Sept. 14 amid concern about the lower near-term outlook from the company. Ford’s stock is down about 12% this year.