MORGAN STANLEY: Ford’s new CEO was not appointed to ‘run a normal car company’ (F)

Jim Hackett Ford

Ford investors are grappling with a big question right now: Will the company’s new CEO revive the automaker’s stock price?

On Monday the automaker hired the former interim director of athletics at the University of Michigan, Jim Hackett, to replace Mark Fields, who was fired on May 22.

As reported by Business Insider’s Joe Ciolli, shares of Ford’s stock did not fare well during Fields’ tenure as CEO. Since he took over the company three years ago, the price has fallen by nearly 40%. On top of that, Ford’s profit margins are far behind those of its larger rival General Motors Co.

In a note out to clients on Wednesday, Morgan Stanley research analyst Adam Jonas wrote the bank does not believe “Hackett was appointed CEO to run a ‘normal’ car company.”

“We see the potential for an unconventional realignment of the business,” Jonas added.

The bank outlined its expectations for the automaker under Hackett’s control. They are as follows:

The automaker will lower its earnings outlook. The bank believes Ford may reassess its strategic spending, which could cut earnings by as much 50% over the next 18 to 24 months.
Monetize strengths. Morgan Stanley thinks it would behoove the automaker to monetize core areas, specifically its F-Series of trucks, which the bank says could account for “over 100% of its global auto profit.”
Transform the automaker into a tech company. The bank sees a huge potential in leveraging its nearly “2 billion vehicle miles traveled into a data harvesting, machine learning, and content delivering juggernaut.”
Hackett needs to start swinging. If Ford is to restore its investors’ confidence, the new CEO needs to affirm his commitment to digitalization right off the bat, according to Morgan Stanley.

The bank is underweight on Ford’s stock. It has a price target of $10, below the company’s current market price of about $11.07.

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