Ford Motor Company Is Becoming “Automaker 2.0”
Ford Motor Company (NYSE:F) may have a trump card to cause Elon Musk and more than one of his engineers at Tesla Motors Inc (NASDAQ:TSLA) to lose sleep. Ford stock has reacted favorably to the company’s newly revealed ambitious plans, as shares were trading at $13.25 on Monday afternoon, near their yearly high. Indeed, Ford is certainly changing its game. It’s moving away from Detroit and closer to Silicon Valley—a huge move.
Ford stock can benefit as the famous Detroit automaker and grandfather of the modern automobile can beat Tesla or Alphabet Inc (NASDAQ:GOOG) at their own games. While the company announced that it is upgrading its headquarters and historic sites in the northern United States to match the campus image pioneered by Silicon Valley startups, it’s the fact that Ford could be the first to market with a self-driving car that puts it ahead of its competitors. (Source: “Ford’s Focus Is on the Future of Mobility,” Barron’s, April 16, 2016.)
Ford is no longer simply a car manufacturer. It is increasingly transforming itself into an automotive mobility specialist. The company said it would assemble in just two buildings, all of the activities that since the 1950s were done at its Dearborn, Michigan home center. Of course, these are two rather large facilities.
The idea behind the campus consolidation is that one building will focus on product development. It will include engineering, research, technology, and vehicle development. (Source: Ibid.) The other will be the administrative headquarters. Ford did not indicate when the project would be complete other than to say it would need a decade.
The project will demand at least a 10-year commitment from Ford, which will use the new campus to accelerate innovation focusing on mobility but also car manufacturing in a new 1.3-million-square-foot facility. (Source: “Fresh facelift for Ford facilities,” Gizmag, April 13, 2016.) Just like at Google, Ford employees will move around using autonomous vehicles, e-bicycles, and on-demand shuttles. (Source: Ibid.)
As for its vehicles, Ford is already planning to sell some 13 new plug-in and electric cars in the next three to four years. The new Ford “Model E” is already in the late production planning stage. Donald Trump notwithstanding, Ford will proceed with assembly of its Model E electric hybrid car at a new factory in Mexico. (Source: “Ford sticks to plans to build new electric car at Mexico plant despite growing controversy,” The Yucatan Times, April 12, 2016.)
Last January, there was a rumor that Ford would work with Google on developing the latter’s self-driving car. Investors were disappointed as the concept of a self-driving and electric “Model T” would likely have sent Ford stock soaring. Yet, there is no reason why Ford cannot develop and manufacture such a vehicle all by itself. Ford already owns its proprietary autonomous driving technology. (Source: “Ford’s Future is filled with self-driving cars and drones,” WIRED, January 6, 2016.)
Ford has a fleet of “Hybrid Fusion” vehicles driving all by themselves around Michigan and in California, not far from where Google tests its cars. (Source: “Ford launches self-driving car tests in California in 2016,” Autoblog, December 16, 2015.) Ford wants to make the affordable self-driving car by 2020, which is rather in line with anything from Silicon Valley, especially considering that driving laws will have to change to reflect the new technology. (Source: “Ford’s self-driving cars likely around 2020, says CEO Fields,” USA Today, January 5, 2016.)
How does this benefit the bottom line and your Ford shares? For starters, if Ford fails to move in the direction of consumer demand, which is increasingly interested in electric vehicles and self-driving technology, shares will become worthless in a matter of years. Ford has to make a transition; the sooner it completes it, the more chances it will have to compete. Perhaps it can even beat the newcomers at their own game.
It was inevitable that for Ford to thrive, indeed to survive, it had to shift modes to address the market’s concern about the future, using the very approaches of the companies that have created it in Silicon Valley. Ford investors should be pleased that the company is changing now, when it can afford it, rather than when it will be too late.