Jim Cramer worries about a UAW union strike at Ford. Here’s how we’re playing the stock
Jim Cramer was cautious on Ford (F) amid heightened risk of a United Auto Workers strike, the latest headline for the club’s stock. However, Jim is encouraged by the automaker’s efforts in electric vehicles and its embrace of other emerging technologies. UAW Strike Concerns Ford stock staged a decent rally from mid-May to early July, approaching its 52-week high of $15.88 reached last August. However, the stock has fallen about 19 percent over the past month, to around $12 a share, as ongoing tense negotiations between UAW Chairman Shawn Fain and all of the Detroit automakers drew national attention. Fein has been outspoken about his demands, which include more paid leave and better pension benefits. The union’s current labor contract with Ford expires on September 14. U.S. President Joe Biden on Monday urged the UAW and automakers to “work together to reach a fair agreement.” Jim Cramer said on Monday he was “in no rush” to buy more Ford vehicles amid growing concerns about a potential strike, and advised investors against buying shares of the automaker’s weak stock. Meanwhile, Deutsche Bank said that while the UAW’s request could hit earnings, the shutdown would be a “significant but non-destructive headwind.” Still, we are very concerned about a possible strike by the UAW. Ford’s recent decline has put its year-to-date gain at just 3.5%, compared with about 16% for the S&P 500 in 2023. F 1M 1-month performance of mountain F stock. New software hires Also on Monday, Ford announced the hiring of former Apple executive Peter Stern to lead a new business unit for the company called Ford Integrated Services. We see this as a positive development. As vice president of services, Stern oversees Apple TV+, iCloud and other key products. Ford’s new division aims to enhance the customer experience by expanding software services across three of its business units: Ford Blue (the traditional internal combustion engine business, or ICE business), Model e (the electric vehicle division) and Ford Pro (created for commercial fleets). department). Ford is looking to add to the recurring revenue streams that have served tech company and electric vehicle rival Tesla (TSLA). Ford said the company already has 550,000 paid software and service subscribers, generating hundreds of millions of dollars in revenue. Chief Executive Jim Farley said in a call with reporters after the announcement that the company’s gross margins on those software services have reached 50%. The rollout of new software services for Ford’s electric vehicle transition is just another way Ford is embracing new technologies. Building electric vehicle products is another way. While we’d like to give Farley and Ford time to ramp up EV production, analysts at Barclays and Morgan Stanley have expressed concern over whether the automaker is focusing too much on EVs. In a recent research note, Barclays said that traditional original equipment manufacturers (OEMs) such as Ford and General Motors (GM) are “in a dilemma” in the transition to electric vehicles, citing weak consumer demand for electric vehicles, from Competition from market leader Tesla, and a lack of charging infrastructure. In a separate note, Morgan Stanley said continued losses in Ford’s electric vehicle business could affect its value proposition, “threatening the company’s strong position among its core retail and business customers.” A weak demand environment for electric vehicles has been a burden on Ford’s transition. Even though Ford’s Model e division’s earnings before interest and taxes (EBIT) loss more than doubled year-over-year to $1.08 billion in the second quarter, we know Ford’s electric vehicles, like a small business, will take time. Strong profitability in the ICE and Pro segments provided much-needed compensation. Additionally, management upgraded its overall full-year profit and cash flow outlook substantially upwards, and reiterated Ford’s commitment to achieving an 8% EBIT margin target in 2026, although the EV losses have raised some questions about whether Ford has The ability to achieve these numbers is up for debate. Farley, however, said in Ford’s earnings release that “electric vehicle adoption will be slower than expected” in the short term. The company now expects to produce 600,000 electric vehicles a year by the end of 2024, he said. Ford had previously projected a production target for the end of the year. On a more positive note, Ford has also been using price cuts as leverage to influence EV demand, and the strategy has been working. In July, Ford announced it would lower the price of its electric pickup, the F-150 Lightning, to pass on savings to consumers from increased factory capacity, lower production costs and improved battery costs. As a result, orders for the F-150 Lightning have increased sixfold through August. But like anything, Ford has to balance price with volume to minimize losses. (Jim Cramer’s charitable trust is Long F, AAPL. For a full list of stocks, see here.) As a subscriber to Jim Cramer’s CNBC Investing Club , you will receive trade alerts before Jim Cramer makes the trade. Jim waits 45 minutes after a trade alert is sent before buying or selling stock in his charitable trust portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after sending out a trade alert before executing the trade. The investment club information above is subject to our terms and conditions and privacy policy and our disclaimer. No fiduciary duty or obligation exists or arises upon your receipt of any information in connection with Investment Club. No specific results or profits guaranteed.
Ford CEO Jim Farley poses for a photo during the unveiling of the all-new electric Ford F-150 Lightning pickup at the Ford Rouge Electric Vehicle Center on April 26, 2022 in Dearborn, Mich.
Bill Pugliano | Getty Images
Jim Cramer is cautious ford (F) That has been a cliffhanger for club stocks of late as the risk of a UAW strike has grown. However, Jim is encouraged by the automaker’s efforts in electric vehicles and its embrace of other emerging technologies.
Svlook
