Turning Point in Sight: Ford on the Verge of Strategy Realignment

Ford Motor Company is currently on a challenging path. The traditional automaker from Detroit is facing issues such as inefficient production, rising warranty costs, and enormous expenses for the development of electric vehicles. However, there are bright spots that allow the company to look optimistically toward the future. An often underestimated yet highly profitable business segment is Ford Pro, which is developing rapidly. In the first half of 2024, Ford Pro achieved earnings before interest and taxes (EBIT) of 5.5 billion dollars. This sharply contrasts with Ford Blue, the traditional business division, which only generated 2 billion dollars, while the electric vehicle segment model-e incurred a loss of 2.46 billion dollars. Goldman Sachs recently downgraded the rating of many automotive stocks but surprisingly upgraded Ford and General Motors. Particularly highlighted was the flourishing business of Ford Pro as well as the impressive growth of software subscriptions, which are increasing by 35 to 40 percent annually. After a disappointing start to 2024, Ford is pulling the plug on some projects in the electric sector. The company is reducing its EV investments by about 12 billion dollars, postponing the successor to the F-150 Lightning, and removing some models from planning to focus more on hybrid vehicles. However, the most ambitious endeavor could be a game-changer: A cost-effective EV, developed on an innovative platform, aims for a price of about 25,000 dollars. If Ford succeeds with this model, it could set new standards in sales and in addressing losses in the EV sector. Currently, the price-earnings ratio of Ford stock is only 11, with an attractive dividend yield of 5.6 percent. Many of the negative aspects seem to be already factored into the price, and Ford is poised to work through the challenges and recover financially.