Ford Investors Assail Executives on Pathetic Stock Return

Ford Investors Assail Executives on `Pathetic' Stock Return

Ford is facing sharp questions about its strategy as shares have fallen about 36% since Fields became CEO and has been pouring billions into self-driving cars and ride-sharing experiments. While Ford’s first-quarter earnings fell 42%,  GM appears on pace for another record annual profit.

Ford Motor Co. (IW 500/4) shareholders assailed the company’s leaders over what one investor called the “pathetic” performance of the automaker’s stock and questioned how the board can continue to support CEO Mark Fields.

Executive Chairman Bill Ford defended the company’s strategy under Fields, though he did not endorse his CEO by name as he did last year under similar shareholder questioning. Fields has been under scrutiny this week by Ford’s  board, which scheduled extra meeting time to drill him on his plans for reversing the company’s fortunes, according to a person familiar with the discussions.

“Look, we’re as frustrated as you are by the stock price,” Ford told shareholders during the company’s first-ever webcast annual meeting. “People have said, ‘Does the Ford family care about the stock price?’ The short answer is yes, a lot. Most of our net worth is tied up in the company.”

The automaker is facing sharp questions about its strategy as shares have fallen about 36% since Fields became chief executive on July 1, 2014. Fields has been pouring billions into self-driving cars and ride-sharing experiments as its traditional car business has struggled far more than crosstown rival General Motors Co. in a slowing U.S. market. Ford’s first quarter adjusted earnings fell 42%, while GM appears on pace for another record annual profit.

Today, Tomorrow

The Ford CEO has defended his focus on the future as necessary for long-term survival. And Bill Ford appeared to agree in his response to several shareholder gripes about the stock.

“We’re frustrated, but our business is performing well,” Ford said. “We’re making investments for both today and tomorrow and I believe that’s the right thing to do.”

Ford appeared to reject requests from several investors to consider a stock buyback as a way to boost share value.

“The problem with buybacks in a company like ours is that we tend to do them when the market is close to its peak because we’re flush with cash,” Ford said. “Then we go into a downturn and the stock goes down and we end up destroying value.”

Ford’s directors have wanted to know why profits are falling as the market shifts to the lucrative sport-utility vehicles that Ford pioneered a generation ago with the Explorer, said the person familiar with this week’s board discussions, who asked not to be identified.

“Mark is in a tough spot,” David Whiston, an analyst with Morningstar in Chicago, said ahead of the shareholder meeting. “If he were ignoring the rise of electric and autonomous vehicles, I can see the board being mad at that, too.”

Executive Exit

News of the impending exit of a top executive this week added to the growing sense of crisis. Chantel Lenard, executive director of U.S. marketing and a 25-year Ford veteran, will leave on June 1 “to pursue other interests,” the company said. The departure of Lenard, 47, is unrelated to any operational issues at the company, according to Marisa Bradley, a Ford spokeswoman.

The issues at the company were underscored when Ford’s U.S. market share fell to 15.1% in the first four months of the year from 15.6% during the same period last year, according to Autodata Corp. GM dominates the most lucrative product category of large SUVs, and Ford is trying to play catch-up by introducing redesigned versions of its Expedition and Lincoln Navigator in the fall.

Fields also has successes to brag about. The company posted pretax earnings of $10.4 billion last year, the second-best in history. But this year, Fields has said, pretax earnings will fall to $9 billion, because of heavy spending on new technology like robo-taxis and electric cars.

Ford conducted its annual meeting virtually this year “to enable us to increase shareholder accessibility while improving efficiency and reducing costs,” Bill Ford said in a statement announcing the format in March.

Avoiding Confrontation?

That didn’t sit well with John Chevedden, a regular presence at the old-fashioned meetings in Wilmington who says he owns 600 shares. He sent an email to reporters ahead of the meeting alleging that Ford wants to avoid confrontation and complaining about “a meeting that one can only access on a computer.” Other companies have also gone digital, but competitors like GM and Tesla Inc. still let shareholders gather in person to make their voices heard.

Ford said the online meeting attracted 350 participants, up from 59 at last year’s live session. Ford executives answered 27 questions, up from nine last year, the company said.

At this point, Fields “is doing all the right things to get the company down the path toward mobility services while being profitable,” Morningstar’s Whiston said. “Then Tesla hemorrhages cash and loses money, and Tesla stock surpasses Ford’s. That’s got to be frustrating.”

Tesla passed Ford in market value last month, despite selling about 80,000 vehicles last year compared to Ford’s 6.7 million. Tesla then briefly surpassed GM, and the two have been jostling for the lead since.

Despite intensifying pressure from the board, Fields’s job isn’t on the line, said the person familiar with the situation. The Americas chief once considered a contender for the CEO job,  Joe Hinrichs, has his hands full trying to reverse shrinking margins in the automaker’s critical home market, the person said.

Turning the stock around will remain a challenge as long as investors view century-old automakers as risky. Even though Ford was the only Detroit automaker to avoid bankruptcy in the last recession, it’s being dragged down by fear of the next one.

Last year, Fields mused that it may take another economic plunge to finally prove to investors that Ford is a far healthier company than it once was. “The market’s looking to see how we do in the next downturn,” Fields said at an investor conference in Detroit.

But the CEO may not have that long to prove he can engineer a turnaround. “If things stay the way they are for another 12-to-24 months, Mark could be under even more scrutiny,” Whiston said. “Whether that’s fair or unfair, it won’t even matter at that point. The board will just want to see the stock go up.”

At the company’s meeting, shareholders rejected a proposal to strip the founding family of its 40% voting control and move to one vote per share. About 35.6% voted in favor, less than the 36.9% who were in favor of a similar proposal last year.

The family controls the automaker through Class B shares that only its members can own. Henry Ford’s great-grandsons, Bill Ford and his cousin Edsel Ford II, are members of the board.

By Keith Naughton

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