DETROIT — Ford Motor Co. CEO Mark Fields' decision to spend billions on autonomy, electrification and new mobility services is being questioned by shareholders and, apparently, some directors as the automaker sacrifices some profits today for ventures that may not pay off for years.
Other automakers, such as Fiat Chrysler Automobiles, have conceded the autonomous race to others, waiting to buy off-the-shelf technologies and products when self-driving capabilities and consumer acceptance are more established.
The Wall Street Journal first reported that Ford's board scheduled extra time to question Fields ahead of its annual meeting. During the shareholder meeting a few days later, Ford's top executives faced multiple questions about its investment plans.
Ford has no plans to deviate from its path, Joe Hinrichs, Ford's President of the Americas, told Automotive News before last week's meeting. The automaker wants to be viewed as a leader in an evolving industry, even if that means short-term financial headaches.
"We think [the investments are] necessary for competing in the automotive space in general, but also in our mission to help the world move more efficiently and improve peoples' lives," Hinrichs said. "On a lot of this technology, it's an evolution in the development process. You learn a lot and you acquire a lot of skills necessary to compete in the end through that development."
He said early-stage investment in self-driving vehicles is paying off in driver-assist technologies such as blind-spot warnings and automatic emergency braking.
"It's not as simple as saying we can turn a switch and have an autonomous vehicle at the end," he said. "We can't ignore all those technologies and capabilities between now and when autonomous vehicles get here, because that's what's going to be necessary to compete."
In the past nine months, Ford announced plans to invest $1 billion over five years in software startup Argo AI; pour $4.5 billion into 13 new electrified vehicles by 2021; and acquire or partner with services such as on-demand shuttles and bicycle-sharing programs.
Those investments — coupled with plateauing new-vehicle sales and other costs — are hurting the Blue Oval's bottom line in 2017. Ford predicts pretax profits of $9 billion, vs. the near-record $10.4 billion it made in 2016.
Fields says that eventually new mobility services could bring profit margins of 20 percent. Hinrichs said the payout may take some time.
"I don't want to give projections, but certainly we're not making these sizable investments with an expectation that it's decades away," Hinrichs said. "I think it's fair to say from the 2020 to 2030 time frame you're going to see a lot of change in the auto industry and the investments we're making today are anticipating that change."
Bank of America Merrill Lynch analyst John Murphy on Friday, May 12, maintained a neutral rating for Ford, but noted that its strategy was "prudent."
"Rather than make short term focused actions to drive profitability and/or its stock price (like some auto companies), Ford, in our view, continues to make balanced investments in emerging technology, is focused on finetuning its product portfolio, is matching supply with demand, and conserving a bit more cash on its balance sheet to shore up its dividend, liquidity, and ability to invest opportunistically in emerging opportunities through next cycle," Murphy wrote in a note to investors.
Stock is stuck
With the stock trading in the low $11 range, that's a hard sell for some shareholders, who have seen stock prices fall 36 percent since Fields took over as CEO in 2014.
Meanwhile, electric-vehicle maker Tesla recently passed Ford in market capitalization value. And while crosstown rival General Motors has faced similar stock issues, profits there are up so far from last year.
"We're as frustrated as you are by the stock price," Executive Chairman Bill Ford told shareholders last week, noting that most of his family's net worth is tied to the automaker's fortunes.
That frustration has been a constant theme for the past three shareholder meetings, but executives maintain they're on the right path.
"We've clearly laid out our strategy to be a leader in autonomy, electrification and mobility," Fields told shareholders. "The biggest strategic shift in the history of our company is well underway and gaining momentum."