Ford Stock in Jeopardy?
Ford Motor Company (NYSE:F) executives have got to be a little nervous now that Donald Trump is going to be sworn in as the 45th President of the United States. The incoming president has been critical of F stock at times, particularly over Ford’s Mexico operations.
The feud started in the first presidential debate, when Trump was arguing that government officials have been too lenient on companies which outsource their operations. (Source: “Ford Fights Back Against Trump Debate Claims,” The Wall Street Journal, September 27, 2016.)
He specifically cited Ford as an example. The Detroit-based automaker recently announced a plan to move its small-car manufacturing plant to Mexico, something that Trump said was outrageous..Ford had opened the small-car factory in Michigan two years after the government helped it gain access to cheap debt, so Trump argues it was the direct result of government action. Yet Ford is about to export those jobs to Mexico, he said.
Of course, Trump was more broadly addressing the ills of the North American Free Trade Agreement (NAFTA), a deal which he insists is “the worst ever” for American workers. But the impact on F stock could be real if his administration unravels past trade agreements.
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It should be noted that many Ford employees didn’t quite see eye to eye with the President-elect. Many of them took to Facebook and Twitter to defend the planned changes, saying it was a necessary business decision to keep F stock afloat.
They pointed out that Ford added 28,000 new jobs since 2011, and that 488 positions were still open in the U.S. Moreover, they reminded Trump that Michigan operations weren’t going to be shuttered, but rather replaced by light truck manufacturing.
Not only does this mean that many (if not most) workers will keep their jobs, but also that those jobs could be more secure. Manufacturing light trucks is more profitable to Ford than building small cars, so Detroit is expected to increase its return on investment for the company.
Nonetheless, Trump suggested that Ford should have to pay an extra tax for every car made outside the United States. Any such tax would likely be devastating to F stock, even if the company passes on the additional cost to customers.
Update (Nov 10): The original version of this story implied the Ford Motor Company received funds from the Trouble Asset Relief Program (TARP). Ford did not receive funding from the TARP program, but it did receive other forms of government assistance. This story has been correct.