Ford: Right Turn Ahead

Published on 10/10/18 | Saurav Sen | 2,630 Words

The BuyGist:

  • Revenue is not Ford’s problem. Cost is.
  • The way to decrease costs is to change the Product Mix.
  • Ford plans on changing its Product Mix as part of its "fitness plan".
  • But we need more details from Management.
  • Given pricing and volume data (shown below), it’s clear to us what they need to do.
  • Utility vehicles, trucks, vans, Mustang, and a couple of crossovers – keep the menu simple.
  • If it executes this plan, Ford should be able to generate more than $3 billion in Free Cash Flow.

Why This Article?

Ford is taking a hit in the markets. First, it was the disappointing second-quarter results. And then it was Steel and Aluminum tariffs. Since the first quarter of this year, CEO Jim Hackett, has touted a “Fitness Plan”. But through all of this turbulence, the analyst community (including me) has been frustrated at the lack of details. So, I’ve taken the liberty to estimate what some of those details could be. The idea is to stress-test my original thesis.

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