Dividends and Ford names COO Farley as next Chief Executive

We have just passed the summer months of July and August and for most people in the US it has meant relatively good weather, most of the time. It might be too hot or too dry, but not too cold. At some point people want to travel for day trips or weekend trips or a week or two. Most of the travel would have been by a car or truck. It is wonderful to have a car to travel the open road.

If you work in the auto industry, the desires for travel have not changed, but how travel is done is changing. If your family lives in the suburbs, one of the needs is a car because transit is not very good or one has to give yourself extra hour commuting both ways. But the closer you live to the city, the car may be nice but not necessarily a must. There are options to use car sharing apps – Uber or Lyft and at the present time comparing costs, there is very good reasons not to own a vehicle.

If you think of the iconic names in the car business, Ford comes near the top of the list. Most people will have heard about Henry Ford who started the company, and maybe the great grandson Bill Ford is the Executive Chairman and the Ford family owns the Detroit Lions NFL football team.

In early August, Bill Ford announced a new Chief Executive Jim Farley will lead the Ford Motor Company. Besides the COVID situation which has reduced commuting and demand for new vehicles, there is a change from internal combustion engines to electric vehicles going on in the industry. At the moment, the biggest competition is in higher priced vehicles. This leads a problem for the older vehicle makers, the internal combustion engine takes more parts to build than does the electric vehicle or they can not be built in the same factory. If you think about vehicles today, often the company could produce more than one car on the factory. The base was the same but the interiors were different, which lead to different pricing of the cars. To build electric vehicles will need new plants and they have to keep producing the internal combustion vehilces.

In an article by Tom Krisher of the Associated Press, Mr. Farley worked for Toyota, joined Ford to run its marketing division in 2007, had been promoted to the chief operating officer and equally works well with Mr. Ford.

There are many challenges for Mr. Farley: he is trying to achieve a 10% profit margin in North America; seeking immediate material and warranty cost improvements, fixing under-performing businesses, maximizing opportunities in commercial vehicles and outperforming the industry in rolling out new models.

Ford is a 117 year old company and Mr. Farley said its competitors are Amazon, Baidu, Tesla, Apple and Toyota. He did not say GM and Fiat Chrysler.

In recent years, Ford had gone to selling trucks, SUVs and cars under the Lincoln brand but fewer cars one would see in the suburbs. Mr. Farley wants to add a more affordable products in a profitable way.

Last year Ford profit went down $3.6 billion as it lost $2 billion in the first quarter, but did better in the 2nd quarter with a $1 billion profit. Mr. Farley has his work cut out for him.

Linking to dividend paying stocks, as individuals you can like or love the story of the automobile companies and hopefully over the years you have driven as many brands as possible and you like one more than others. Vehicles are part of life and will not be changing, it was ironic the price of gas fell to some of the lowest levels in years and the public did not buy because of the public health order to stay at home. There are many challenges to every industry and the competition changes in ways most of us do not think about. Did you think Amazon was a competitor of Ford? When you buy dividend paying stocks, you have the luxury of buying time before changes impact the company, but changes do come so that is why doing your homework and staying abreast of alternatives is a good thing.

There are more questions than answers, till the next time – to raising questions.

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