Ford Motor Company (NYSE: F) recently announced that it will continue investing in autonomous car technology. During the previous month, the auto manufacturer disclosed that it will release driverless cars for ride-hailing firms as early as the year 2021. Yet, the car company will not be matching up the intensive investments performed by its competitors, including Toyota and General Motors.
According to the Chief Executive Officer of Ford Mr. Mark Fields, market players and analysts should not “confuse activity with progress” as looking at massive investments made by its competitors is like “looking at the wrong scoreboard.”
Ford has stated that its financial performance for the following year will plunge in comparison to this year, as the auto maker is investing in the autonomous and connected car industry. This just goes to show that Ford is taking a significant risk with its investments in the driverless car technology.
Even though some questions have been raised regarding the late and smaller investments in the autonomous car technology space that Ford has made in comparison to its rivals, the Ford CEO is adamant that the auto maker is trying to be wise in terms of its spending. Instead of looking at its other competitors, the car corporation intends to continue its progress in driverless car technology at a steady pace, while keeping its stockholders satisfied.
Ford reported that it will prioritize maintaining sustainable and stable dividends. At present, the auto manufacturer has a 4.7 percent dividend yield. Additionally, Ford is also aiming to achieve cost efficiency of about $3 billion annually between this year and 2018. Meanwhile, it anticipates that the capital expenditures will edge higher by 5.6 percent of the automotive revenue in the year 2018 as a sign of heightened investment but will decline after the mentioned year.
Ford is aware that the auto industry of the United States is close to its cyclical downturn and that a car industry boom may follow. Yet, even if the auto sales in the United States slump to 11 million next year, Ford’s Chief Financial Officer Mr. Bob Shanks stated that the car company will be able to break even. Even if sales in the United States will decline by 40 percent next year, its cost for layoffs will amount to $500 million—equivalent to one-fifth of its cost back in 2007.
This emphasizes that Ford has carefully planned its future financials and has even prepared for a broad auto industry sales plunge. Small and wise investments in driverless and connected car technology, supported by cost savings make the stock of Ford a Strong Buy.