Ford’s boss hits the road

The carmaker’s shares have struggled and the CEO has paid the price. Will that cheer investors up? Ben Judge reports.

“A look at Ford’s share-price graph says it all,” says Alan Tovey in The Daily Telegraph. In the three years since Mark Fields was appointed chief executive, it has fallen by almost 40%. Earlier this month, Ford’s market value fell below that of Tesla, the electric-car maker. The company, which was worth $67bn in 2014, is now worth just $43bn, little more than the $40bn in cash, equivalents and short-term investments on its balance sheet, says Chris Bryant on Bloomberg Gadfly.

So this week Ford decided enough was enough. Fields was replaced by Jim Hackett, head of Ford’s autonomous vehicles subsidiary – although, “to be clear”, Fields wasn’t fired, Bill Ford, the firm’s executive chairman, told the BBC. “He decided to retire. That’s an important distinction.” The two men “got together and… decided it was the right time for him to resign”. Thus Fields became “the first prominent casualty” in an industry shake-up that is “forcing traditional car manufacturers to find ways to make profits on vehicles for today’s softening market, while investing heavily in a future where cars will largely be shared, self-driven and powered by electricity”, say Peter Campbell and Patti Waldmeir in the Financial Times.

And that divide was precisely Fields’ problem, says Matthew DeBord on Business Insider. He had to “serve two masters” – “Ford’s core business, which was hugely profitable”, and the investors who thrill to see the disruption of the car industry by the likes of Tesla and other Silicon Valley upstarts. Despite Ford making record profits and enjoying booming sales, “Wall Street is more interested in high-risk bets on emerging technologies”.

Still, “it’s not that Fields has failed to pour billions of dollars into self-drive and ride-sharing experiments”, said Russell Hotten of the BBC. “It’s that shareholders see little return in sight.” That may suggest a double standard at work, says Bryant. “When Tesla splashes billions on electric vehicles and Uber burns cash so millennials can ride around in style, investors applaud. When Ford does similar the market frets about lower profit.” But what sealed Fields’ fate was that his failure had become an existential threat for the carmaker’s founding family, who control 40% of voting rights with less than 2% of the stock, says Rob Cox on Breakingviews. “Two weeks ago, a majority of those shareholders not named Ford voted to abolish the family’s super-voting stock” in protest at the poor share-price performance. “The Fords took the hint, and the chief executive is now leaving.”

 The “smart way” to mark the return of Lloyds Banking Group to fully private hands last week would have been for the bank to put out “a short and dull statement”, says Nils Pratley in
The Guardian. After all, an “£894m profit over nine years on a £20.3bn punt isn’t much to shout about if you annualise the return”. Instead of that, “Lloyds summoned trumpets and calculators and issued a three-page announcement”, presenting the state’s investment return in “the most flattering way”.
It all feels “slightly over the top”. Time to give the “backslapping” a rest.

Earlier this month, Barclays chief executive Jes Staley was left red-faced after he entered into an email conversation with someone he thought was John McFarlane, the bank’s chairman, but who turned out to be an angry Barclays customer. Now, it appears the prankster has struck again, says The Daily Telegraph’s Ben Martin. This week, it’s the turn of the governor of the Bank of England, Mark Carney, who was lured into a conversation in which he discussed a former governor’s fondness for a bracing drink. “I will drink the martini and order another two. Apparently that was Eddie George’s daily intake… before lunch,” wrote Carney, under the impression he was talking to Anthony Habgood, the chairman of the Court of the Bank.

“There is hardly anyone in Britain who wouldn’t like to see Fred Goodwin put on the stand at the high court and slapped about,” says Simon English in the Evening Standard. But the effort by RBS shareholders to sue him over the bank’s 2008 rights issue – claiming that the prospectus was inaccurate and that Goodwin and the rest knew that and lied – “looks like a stretch”. The whole point was that Goodwin didn’t know anything. Investors “made a bad bet with a man who had no business being in charge of a bank and lost”.

Britain’s ten most-hated shares

Company Sector Short interest on 23 May Short interest on 25 Apr
Carillion Construction 24.57 23.82
Wm Morrision Supermarkets 17.46 17.41
Ocado Supermarkets 16.90 17.04
Mitie Group Outsourcing 13.76 15.09
Debenhams General retailers 10.94 10.23
Tullow Oil Oil & gas 10.38 16.36
Marks & Spencer General retailers 9.15 8.94
Telit Communications Telecoms equipment 8.79 9.67
Hansteen Holdings Property 8.48 NEW ENTRY
J Sainsbury Supermarkets 8.13 NEW ENTRY

These are the ten most unpopular firms in the UK, based on the percentage of stock being shorted (the “short interest”). Short sellers aim to profit from falling prices, so it can be useful to see what they are betting against. The list can also be an indicator of stocks that might bounce strongly on unexpected good news when short sellers are forced out of their positions (a “short squeeze”). Real estate investment trust Hansteen is back in the top ten, having dropped out last month, as is Sainsbury’s. They replace oil explorer Ascent Resources, and cybersecurity firm NCC.

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