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Ford Motor Company

F

Wall street consensus:

### Consensus View on Ford Motor Company (Ticker: F)

#### Overall Performance Assessment:
Morgan Stanley's series of reports collectively offer an optimistic view of Ford Motor Company, identifying it as a pivotal player in the US automotive market with a strong potential for strategic growth. The analysis highlights Ford's tactical adjustments in the face of evolving EV market dynamics and its financial maneuvers aimed at bolstering profitability and market position. Each report acknowledges challenges, notably in the EV sector, while emphasizing Ford's operational resilience and strategic foresight as key drivers of its potential success.

#### Synthesis of Key Topics:
1. **EV Strategy Adjustments and Partnerships:** There is a consistent theme across the reports concerning Ford's recalibration of its EV strategy. The company's pivot towards more capital-efficient models of operation, including exploring partnerships and reconsidering its production scale (especially for the F150 Lightning), demonstrates adaptability. Ford's engagement with Chinese LFP suppliers and the emphasis on capital efficiency over massive technological investments reflect a nimble approach in a shifting landscape.

2. **Financial Health and Operational Efficiency:** The reports underscore Ford's strong financial guidance and operational efficiency as significant positives. The FY24 Adjusted EBIT guidance surpassing expectations signals a robust financial health which, coupled with strategic capital allocation and refinements in operational aspects, positions Ford favorably against competitors.

3. **Ford Pro's Strategic Importance:** All reports draw attention to Ford Pro as an underappreciated asset that could play a critical role in funding Ford's EV initiatives and achieving operational efficiency. This segment's success might not only counterbalance investments in EV but also unlock additional shareholder value.

#### Compiled Future Investment Considerations:
1. **Refinement of EV Strategy and Execution:** Ford's ability to adeptly adjust its EV strategy, leverage strategic partnerships, and optimally balance between EV and ICE vehicle profitability will be critical to its long-term success. Investors should closely monitor these strategic moves for indications of Ford's market adaptability and potential growth opportunities.

2. **Capital Allocation and Financial Discipline:** Given the emphasis on capital efficiency, Ford's decisions regarding capital expenditures, investments in technology, and partnerships will significantly influence its financial health and competitive positioning. The company's financial discipline in reallocating resources towards profitable or strategically significant areas warrants close observation.

3. **Market Position and Brand Strength:** Leveraging the brand strength and profitability of legacy models while transitioning towards a more diversified and electric future remains paramount. The company's ability to maintain a strong market position through this transitory phase can offer a sturdy cash flow source, supporting its innovative endeavors.

4. **Investor Sentiment and Perception Shifts:** Efforts to recalibrate investor sentiment and market perception towards Ford's holistic value proposition, beyond the narrow focus on its EV narrative, could unlock additional investor interest and capital appreciation opportunities. Monitoring shifts in market perception will be essential in assessing Ford's progress in communicating its strategic vision and operational achievements.

In conclusion, Morgan Stanley's analyses suggest a cautiously optimistic outlook for Ford, predicated on strategic agility, financial resilience, and the potential for innovative growth avenues. Despite the near-term challenges, particularly in the EV domain, the consensus recognizes Ford's efforts to refine its approach and capitalize on its traditional strengths, pointing toward a promising trajectory for patient investors.

Ticker:

​Recent Conference Call

### Ford Motor Company Earnings Call Summary

#### Insightful Quote from CFO, John T. Lawler:
"We have complete confidence in our Ford+ plan, focusing on investing in our businesses for growth, profitability, driving a higher stock price, and returning 40% to 50% of our free cash flow to shareholders through dividends. We're dedicated to capital efficiency, understanding the seismic changes in our sector, and ensuring our balance sheet provides the flexibility needed for strategic growth investments."

#### Key Quarterly Business Trends:
1. **Strategic Capital Allocation and Efficiency**: Ford is emphasizing prudent capital allocation, improving capital efficiency amidst industry changes. This includes de-risking international operations, reducing investments in uncertain autonomous vehicle technologies, and focusing more on viable areas like L2+ and L3 technologies with lower expenses.

2. **Investment in Growth with a Focus on High Margins**: The company plans to invest in growth sectors with potential for higher margins, especially in integrated services that reduce cyclicality. Ford is adjusting its autonomous vehicle strategy to allocate less capital upfront, reflecting a slower growth outlook in this segment. This demonstrates a flexible and strategic response to changing market dynamics.

3. **Focus on Earning a 20% Return on Invested Capital (ROIC)**: Ford is targeting a 20% ROIC, showing a disciplined approach to capital and investment. This strategic prioritization is designed to enhance shareholder value and ensure sustainable growth.

#### Critical Questions from Analysts:
1. **Dividend Strategy and Timing (Dan Meir Levy, Barclays Bank PLC)**:
- **Concern**: The strategy and timing concerning special dividends amidst competitive shareholder returns.
- **Management Response**: Ford aims to payout 40%-50% of free cash flow through dividends, maintaining a base dividend alongside any supplemental amounts decided annually, reflecting a balanced approach to shareholder returns.

2. **Updated 2023 Guidance (Dan Meir Levy, Barclays Bank PLC)**:
- **Concern**: Concerns around updated guidance for 2023, including impacts of UAW costs.
- **Management Response**: Ford anticipates, despite the strike impacts costing billions, to hit the higher end of its original earnings guidance, suggesting underlying business strength and a comprehensive plan to offset increased labor costs through efficiencies.

3. **Vertical Integration Adjustments within EV Strategy**:
- **Concern**: Adjustments in EV strategy, particularly regarding vertical integration.
- **Management Response**: Adjusting as the market evolves, focusing on areas of competitive advantage in EV technology while remaining flexible in capital investment based on market demand.

#### Outlook and Guidance:
Ford maintains a focused approach on capital allocation towards growth and profitability, with strategic adjustments in response to market changes, particularly in autonomous vehicles and EVs sectors. Their disciplined investment strategy aims to deliver higher margins and sustainable growth. The guidance reflects a strong foundation and an adaptive strategy aiming for a balance between growth investments and returning value to shareholders through dividends, all while navigating the evolving automotive landscape efficiently

Key Questions to follow

Based on the thematic investment tag of 'Autonomous, Metals, Green, Ride, Vehicles' and the insightful details from the provided documents, here are three questions focused on Ford Motor Company's potential for future growth within this context:

1. **How is Ford Motor Company positioning itself in the competitive landscape of autonomous and green vehicles, especially considering its strategic pivot away from vertically integrated electric vehicle (EV) technology investments towards collaboration with tech and manufacturing partners?**

This question explores Ford's adjustment in its approach towards developing autonomous and green vehicles, a key element within the thematic investment tag. By analyzing Ford's strategy in leveraging partnerships, particularly with Chinese EV suppliers as mentioned, we can gain insights into how Ford plans to innovate and remain competitive in the autonomous and green vehicle market.

2. **Given the emphasis on capital efficiency and the strategic importance of Ford Pro in funding losses from the EV segment, what are the implications for Ford's long-term growth prospects in the 'Ride' and 'Vehicles' domain, and how does this balance with its commitment to green initiatives?**

This question delves into the financial discipline Ford is exercising and how its focus on parts of its business like Ford Pro could influence its growth in the automotive sector, especially in services tied to 'Ride' and 'Vehicles.' Moreover, it looks at the balance Ford is attempting to strike between profitability, funding innovation in the EV space, and adhering to its green initiatives.

3. **Considering the slower-than-expected adoption rates of EVs in the US and the deliberate scaling back of production as a strategic adjustment, what future trends or market shifts does Ford anticipate in the 'Metal' component of its vehicles, and how might this impact its strategy in green and autonomous vehicle technologies?**

This question investigates the repercussions of market trends, particularly the US's slow EV adoption rate, on Ford's strategic decisions surrounding the composition and production strategies of its vehicles. It focuses on the 'Metal' aspect in relation to the production materials and advancements in EV technology, questioning how Ford might adjust its strategic outlook on green and autonomous vehicles in response to market demand and material innovation.

These questions aim to highlight Ford's strategic positions and potential growth pathways within the specific thematic areas of autonomous, metals, green, ride, and vehicles amidst evolving market dynamics and strategic shifts.

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