Ford's annual meeting was virtual, but its troubles are real

Ford Motor Co. didn’t experience any angry shareholders storming out of its annual meeting on Thursday. They weren’t able to — they watched the proceedings on their laptops.

The automaker, facing sharp questions about its strategy and under rising pressure to turn its slumping stock around, took the unprecedented step of hosting the gathering on the internet. One investor and longtime attendee of the physical meetings Ford held for years in Wilmington, Del., accused the company of “hiding from shareholders” with the virtual session.New meeting format or not, Ford’s bosses haven’t been able to escape scrutiny so far.
CEO Mark Fields was drilled on his plans for reversing the company’s fortunes this week by the board, which scheduled extra time to question him, according to a person familiar with the situation. Directors wanted to know why profits are falling as the market shifts to the lucrative SUVs that Ford pioneered a generation ago with the Explorer, the person said.
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 in a slowing U.S. market. Ford’s first quarter adjusted earnings fell 42 percent, while GM appears on pace for another record annual profit.
The Ford CEO has defended his focus on the future as necessary for long-term survival. But investors have shown little appetite for his long-game, trading down shares 36 percent since he became CEO on July 1, 2014.
“Mark is in a tough spot,” said David Whiston, an analyst with Morningstar in Chicago. “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 percent in the first four months of the year from 15.6 percent 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 — who has said he wants to keep “one foot in today and one foot in tomorrow” — 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 the robo-taxis and electric cars.
That hasn’t pleased impatient investors, who vented their displeasure with Fields at last year’s annual meeting in Wilmington.
The event was conducted virtually this year “to enable us to increase shareholder accessibility, while improving efficiency and reducing costs,” Executive Chairman 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 alleging that Ford wants to avoid confrontations 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.
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.”
Source: Automotive News