If you drive by a car dealer’s lot these days you will find it bereft of vehicles. When the vaccination rates in the country started to soar and we all wanted to be out and about, the rate of new car sales soared on an annualized basis to close to 18 million vehicles. It was nirvana for just about every brand. Then the shortage of chips to complete the cars coming down the assembly lines became overwhelming.
Car production rates are slowing to a crawl and sales have fallen to an annualized rate 30% lower at about 13 million. New models were being favored in getting the sparse supply of chips as they became available but now even that is not enough. It is increasingly looking like major relief for the car manufacturers will not be coming until 2022.
This week GM announced it was shutting down all but a handful of its manufacturing facilities because of the chip shortage. Despite all these disruptions at GM and Ford, too, electric vehicles are coming. They are simultaneously laying out roadmaps for the next several years while dealing with the production realities caused by the global disruption in chip supplies. Without the chips to control them, nobody can produce these cutting edge vehicles.
Clearly key to this revolution in the car industry is having the right personnel to move your vision forward. Whether the cars are self-driving or offer more features to keep you and your kids entertained, cars in the future will be quite different than cars of the past. Ford struggled for a few years with several CEOs before turning to Jim Farley last year. The stock (which we own) did very well until the chip problem reared its ugly head.
One of the finest, most sought after executives in this space is Doug Field. Remember the SEGWAY people mover? Field was key to that product as chief technical officer. Then he was recruited by Elon Musk from Apple to play a key role in the development of the Tesla 3, which put Tesla in the lead. He returned to Apple and has been in charge of developing the never announced but widely rumored Apple car project since August 2020.
Ford’s press release on Sept. 7 said Field will lead the company’s efforts to develop the next-gen Blue Oval Intelligence tech stack to deliver “smart, connected vehicles and services that improve over time through constant updates.” He will oversee the company’s Embedded Software and Hardware organization currently consisting of Vehicle Controls, Enterprise Connectivity, Features, Integration & Validation, Architecture & Platform, Driver Assistance Technology and Digital Engineering Tools.
This is a major hire for Farley and underscores Ford’s commitment to producing market-leading products in the years ahead. Ford has been using an interesting formula of reviving very popular old brand names like the long-discontinued Bronco and bringing them back as EVs.
Ford shares had a major surge of popularity in the spring to a recent high price in the mid-teens. With the chip induced delays, it has fallen back to the 13 level where it is again an interesting purchase. You just must be patient and recognize that the chip shortage, an industry factor external to the company, will be resolved with time, especially as more chip production comes online in the U.S.
Joan Lappin CFA has been called an “investment guru” by Business Week and a “top manager” by the Wall Street Journal. The Sarasota resident founded Gramercy Capital Management, a registered investment adviser, in 1986. Email her at JLappincfa@gmail.com. Follow her on twitter: @joanlappin. Her past columns appear at heraldtribune.com/business/columns.
