6/16/17
I sent the following letter to the Wall Street Journal last
month in response to a very insightful column by Holman W. Jenkins, Jr. It was not published, but I thought my
readers would appreciate the points, which certainly transcend Ford, that I
made in this missive:
5/24/17
Holman W. Jenkins, Jr. (“Ford’s Turmoil is Not About Tesla,
Opinion,” 5/24/17) rightly asserts that Ford’s future lies not in gee-whiz
adventures like autonomous vehicles and new visions of urban mobility but,
rather, in its “enduring strength in designing and assembling complex, consumer
ready machines” while being ever mindful of capital efficiency and rationally
maximizing shareholder value.
One can only hope that all the yammering from Mark Fields
and Bill Ford about the whiz-bang technologies of the future was merely an unsuccessful
attempt to appeal to Wall Street. The
analysts that populate Wall Street largely come from a narrow stratum of
society that shares enthusiasms with all the introspection of sheep and
assumes, incorrectly, that the general public thinks just like it does. In an effort to please these types, car
companies devote a little capital and lot more breath at shareholder meetings
and ink in annual reports to things like autonomous vehicles. Likewise, fast food giants boast of their
efforts to improve the “natural” and healthy nature of their new menu
choices. Successful companies, however,
realize that their typical customer doesn’t give a rat’s hindquarters about things
like bespoke burgers made from exclusively organic ingredients, $100,000 third
cars, and other trendy piffles that capture the imaginations of those who work
on Wall Street for annual pay packages that exceed the net worth of the typical
American. These alert managements throw
a bone to the Wall Street crowd and then go about the business of allocating
capital to those products and services that actually sell and generate profits
rather than capture rave reviews among the denizens of Wall Street. Much to the amazement of Wall Street, this
strategy usually works; look at the progress of McDonald’s stock once it
de-emphasized sprouts burgers, or whatever the Wall Street crowd was panting
about, and started serving calorie and fat laden breakfast throughout the day. Look at the stock of Fiat-Chrysler, which has
vastly outperformed its Detroit peers and the S&P this year while giving
the faintest of nods to the latest science project daydreams of the Wall Street
crowd and getting down to the business of building the Jeeps and Rams that
capture the enthusiasm of people who don’t regularly drive to $20 burger joints
in $100,000 Teslas.
One can only hope that the new strategy at Ford is to throw
the crowd on Wall Street a bone by emphasizing the mobility aspect of Jim
Hackett’s background while having Mr. Hackett do what he did at Steelcase…rationally
allocate capital in the interest of delivering returns to shareholders today,
not twenty years from now. The danger
for Ford shareholders and employees lies in the distinct possibility that
Messrs. Ford and Hackett really believe that waiting for Ford’s science fair
projects to pay off long after many of their shareholders are gone is a
rational strategy.
Full disclosure: I
own some calls on F.
F $11.15
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