Being bullish on the auto industry can be frustrating at times. I have often pointed out the various key developments for the industry that insinuate growth, and I am almost always surprised when the industry trades lower. The auto industry consists of volatile stocks that have the ability to trade with significant loss or large gains in a short period of time. The reason being concerns over global growth and the sustainability of high sales, high costs, Europe, and the uncertainty surrounding the future sources of better fuel-efficiency. The concerns surrounding the auto market are endless as investors are constantly reminded of the issues that plagued the industry just a few years prior during the recession. Therefore, I was honored and truly excited about Seeking Alpha granting me the possibility to interview Ford Motor Company (F) CEO Alan Mulally and looked forward to him answering some of the investor concerns.
Seeking Alpha gave me the opportunity to speak with Mulally, following earnings, with the goal of clarifying some of the issues that have kept confidence low despite incredible sales. The interview consisted of Mark Bern (K202), and Seeking Alpha editors Yigal Grayeff and Yosef Levenstein. We spoke about a variety of issues and I was very impressed by Mulally’s willingness to speak and answer questions. Of course, there were some areas that he was hesitant to discuss, but for the most part he gave very detailed, precise, and informative answers to all of our questions. In fact, I was a bit surprised by some of his answers including his comment about first owning a Chevrolet. I believe his excitement regarding the company along with his answers to be honest and legit. So now that the interview is complete, I will spend this time to reflect on what I believe were the key points and areas of concern.
The first area that I want to discuss is the vehicles, because after all, it’s the vehicles that ultimately decide the fate of Ford. If you’ve ever read one of my articles that cover the auto industry then you know that I have always preferred General Motors (GM). I just recently changed my position and now own shares of Ford, but I have always driven a GM vehicle, because I’ve always liked the style and performance of the vehicles. However, one of the first statements that I made to Alan was that I just recently purchased my wife a Ford Focus. She had wanted to buy a new car but when my wife called and told me it was a Focus I was less than enthusiastic. I wasn’t shocked because it was a Ford, but the Ford Focus has always been known for lacking style. Yet like I told Alan, I think I drive it more today then my wife because of the incredible changes that Ford has made to its units.
Ford has completely changed its identity, and the conversion of hardcore GM buyers like myself is just another example. Mulally spoke about this fact quite often, and gave me the belief that his goal at this point is to just sell as many Ford units as possible, and worry about the profits later. Ford appears to be a company that is driven by total sales, which is evident by his very high guidance for total vehicles sold, higher than analysts expect. I asked him specifically about technology and what will be driving the company into the future; because a real concern has been Ford’s ability to maintain these high sales, in which he basically spoke about diversity and consumers having choices along with better fuel-efficiency.
Obviously fuel-efficiency is another great concern among investors, because some believe that the high gas prices in 2008 and 2009 led to the downfall of the auto industry, since its vehicles were not built with fuel-efficiency in mind. Mulally gave good insight into what he expects from future technology to provide better fuel-efficiency. He gave both short and long-term trends which include the focus on electric vehicles and more models that incorporate both gasoline and electricity, probably similar to the Sonic. However, long-term, Mulally spoke about various biofuel alternatives, hydrogen vehicles, and natural gas which means that he may not believe in the long-term efficiency of electric vehicles, or that maybe he believes the trend will not last. I tend to agree, because although electric vehicles do aid in fuel-efficiency we live in a society that is time efficient, and the consumer may not welcome the idea of having to charge a vehicle to maximize a full tank of gasoline.
The interview as a whole was informative and I only wished that we had more time to speak with Mulally. The three points that I really wanted to cover were: the future of fuel-efficiency, the company’s bottom line, and the idea of lowering guidance to a level that can be reached regardless of economic events. As I’ve already stated, I believe that Mulally provided solid feedback to my questions regarding the future of gasoline and alternative fuel. However, I was not impressed by his avoidance of questions regarding the company’s bottom line and lowering guidance.
I asked Mulally a question about lowering guidance because of commodities being high and European turmoil that continues to exist. And although he reiterated and admitted that harsh economic conditions did affect earnings, he would only speak on future margins that he expects to increase and believes that growth rates in the Asia-Pacific region are much more sustainable. He mentioned the industry forecast of 13.5 - 14.5 million units sold in the U.S., and 14 -15 million units in Europe. With that being said, he believed that the company’s goals are appropriate and plans to utilize the One Ford plan.
As an investor I do wish that Ford would just lower its guidance and have one bad day so that it could exceed expectations and create more optimism among investors. Investors expect sales to be high and for the company’s growth to continue. However, I don’t believe investors are sold on the notion of its margins improving by such a large level, or that the company can meet such high bottom line expectations. Yet Mulally was somewhat dismissive on this one issue, which is so important to investors.
But, like I said, the interview as a whole was a good experience and allowed me to experience the optimism and excitement of Mulally. Over the years I have interviewed and spoken with several CEOs and I can honestly say that Mulally’s optimism is contagious and it’s obvious that he truly believes what he is selling and that it’s not an attempt to affect the company’s stock.
Mulally has been instrumental in the emergence of Ford over the last few years, and I hope that he plans to stay at Ford for a very long-time. This question was also asked, and might I add, it was answered by him saying, “I am absolutely honored to be serving Ford and I have no plans to change that.” I feel that’s a good note to end a great conversation, and I hope you enjoyed the interview and that it gives you better insight into the future of Ford which I believe is looking quite bullish.
Below are links to the other articles in this series:
- For the interview transcript click here.
- For Marn Bern's (K202) article click here.
- For Yigal Grayeff's article click here.
Disclosure: I am long F