Pretend for a moment that you are an executive sitting on the top floor of Ford’s legendary Glass House – its global headquarters in Dearborn Michigan – and staring forlornly at the company’s stock. It is:
- Down 24% year-to-date. Yes, your cross-town rival General Motors is 11% lower YTD but that’s still obviously better than your own performance.
- Off 74% from its all time highs. Which were over 20 years ago, in early 1998.
- At the same levels as December 1986. And November 1991. And March 2003.
- Worth $38 billion, about the same as Ross Stores or BB&T – two very fine (but distinctly regional) players in US retail and banking.
- Worth far less than Tesla ($60 billion market cap), who’s visionary but deeply erratic CEO thinks it is a real accomplishment to spit out 5,000 cars/week when you do multiples of that and no one seems to care.
- Even cheaper to Uber’s 2019 IPO price chatter of $120 billion, a company founded less than a decade ago.
Then a bright young finance staffer walks in your office, plunks down an investment bank M&A presentation and says, “We should buy this scooter company… It’s only $100 million!” Your first thought is “that’s a lot of money for a scooter”. But then you remember Ford spent $7 billion last year on CapEx… Compared to that, $100 million feels like petty cash.
But more than anything you reflect on both what that long run stock performance and relative valuations to Tesla and Uber are shouting at you from the capital markets sidelines: “You are slowly going extinct.” You pick up the deal book on Spin, the scooter company with the nine figure price tag, and flip through the summary. The business looks a lot like Bird and Lime, basically an electric scooter rental service enabled by a mobile app and popular in a few cities around the US.
Buying Spin might just actually address some of what that $9 stock price says about you:
- Despite a killer talk by Ford CEO Jim Hackett at CES this year, you don’t have a lot to show for his “City of Tomorrow” concept where technology dovetails with consumers to deliver efficient personalized mobility. And Jim isn’t happy the management team has been slow to rise to that bait, or so you’ve heard…
- Younger people simply don’t care about cars and trucks the way their parents and grandparents did. And once autonomous cars become safe and cheap enough for mass adoption, personal ownership of light vehicles might end up like the market for carburetors and other high performance aftermarket engine parts. Limited to a handful of enthusiasts, in other words.
- Capital markets worry that Ford is behind GM on autonomous driving because Softbank and Honda have both dropped hundreds of millions of dollars into Cruise, the General’s in-house initiative.
- Despite its own scooter initiatives at Purdue University (branded “Jelly”, of all things) and even buying shuttle company Chariot in 2016, Ford’s mobility strategy looks incomplete at best and haphazard at worst. And the Street seemed to ignore your software company purchases (Autonomic and TransLoc) earlier this year.
- If nothing else, buying Spin might get you a seat at the table once Uber and Lyft go public and need to buy assets like scooter systems in first and second tier US cities or in Europe. Maybe you can get Ford dealers to promote them, and perhaps even pay service personnel or Ford field staff to handle maintenance and recharging.
You realize you have no choice – Ford needs to buy Spin, even at that crazy price, before some other automaker realizes the same thing. The entire industry has the same problem your sorry stock price chart portrays: longstanding worries of global automotive overcapacity are now multiplied by the fear of technological disruption.
“OK, let’s do it… And get the bankers to find you 5 more of these things for us to buy…” Then you start wondering what the executive dining room is serving for lunch today.