For new Ford CEO Fields, aluminum truck is key

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DETROIT (AP) — For all the miracles Alan Mulally pulled
off at Ford Motor Co., one eluded him. He couldn’t make the stock price
leap.
Soon, the problem of boosting Ford’s stock will fall to Mark
Fields. On Thursday, Ford officially announced that Mulally would
retire on July 1 and Fields would replace him as CEO. Fields was widely
seen as the heir apparent after being named chief operating officer late
in 2012.
Under Mulally, Ford underwent a massive restructuring,
resumed paying a dividend and ran off a string of highly profitable
quarters. While the stock has doubled from around $8 when Mulally took
over in 2006, it hasn’t closed above $18 for more than two years. For
the past three months, it’s been stuck between $14.50 and $16.50 as
harsh winter weather kept buyers away from showrooms.
The stock
could stay in limbo for a while. Ford has warned that pretax profit will
fall to between $7 billion and $8 billion this year from $8.5 billion
in 2013, as it launches a record 23 vehicles worldwide and builds seven
plants, including four in China. Investors don’t often embrace reports
of lower profits.
Analysts don’t see much upside for the stock
until Ford starts selling a revolutionary new aluminum-body F-150 pickup
late this year. The truck, which will be 700 pounds lighter than the
current version, could get close to 30 miles per gallon of gas on the
highway, far better than its competition.
But Ford faces the
gargantuan tasks of retooling factories to produce such a large body out
of something other than steel, and of convincing skeptical buyers that
an alloy version of the nation’s top-selling vehicle is just as tough as
the old one.
"If they can pull it off, I think it could sure be
good for Ford, and that stock will take off and go," said Gary Bradshaw,
a portfolio manager with Hodges Capital in Dallas. "I guess if you get
30 miles per gallon, we’ll all be driving one."
Many analysts say
Ford’s stock is now undervalued. The dividend yields just over 3 percent
per year, better than 10-year U.S. Treasury bills, and the company’s
balance sheet has been cleaned up. Its debt is now investment grade.
Standard
& Poors analyst Efriam Levy put an $18 price target on the stock
and reiterated his "Buy" opinion. Ford shares closed Thursday down 24
cents at $15.91.
For the stock to grow, many think that Fields has
to move forward with Mulally’s plans for key new vehicles, reverse
losses in Europe and South America and keep growing the business in
Asia.
"Ford is set up for a really nice 2015. The table’s being
set for a really strong performance in the U.S., Europe and China next
year," said Morningstar analyst David Whiston.
He thinks Fields
should buy back shares because they’re cheap at the moment. But Whiston
doesn’t expect that to happen because Ford is investing in future
vehicles and growth overseas.
Bradshaw, whose firm holds about
250,000 Ford shares, doesn’t see any other catalysts for the stock in
the near term unless the global economy picks up. But he thinks Ford
stock will eventually break out of its shackles, largely because Mulally
has set Fields up to succeed.
"My guess is Mulally’s got the thing teed up, and he’s probably got a great bench," Bradshaw
said.
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