Ford’s (NYSE:F) quarterly earnings report restored investor confidence on October 24 when the company beat on earnings and revenue. That rally in the stock did not last for very long.
Trade war worries between the U.S. and China scared investors to sell the stock. Even as China lifted some of the tariffs levied against U.S. vehicle imports, Ford stock lost over 10% in the last week. It closed on Dec 14 at $8.52, 36% below its yearly high of $13.33. This is a rock bottom moment for Ford.
Just as General Motors (NYSE:GM) said it would lay tens of thousands of workers to cut costs and take out sedans from its product mix, Ford started a management shakeout in its European unit. Ford will cut models, cut jobs, and may close plants. This is part of the "Sprint to 6 Reset and Redesign" plan.
Ford will lose 6% in EBIT margin as it sustains investments in vehicles and services in Europe. Markets responded by selling the stock nearly every day since the start of December. Ford’s decision to stay in Europe and continue bleeding money in China is hurting the overall business. It now must spend more to fix the business in both regions.
Merger in the Future
The Ford-Volkswagen partnership may one day lead to a merger. While this may not offer a decent premium on Ford stock, the development deal still saves on costs for both firms.
