Morgan Stanley: Ford will survive coronavirus halt, but stock may not have bottomed yet

Adam Jonas, Morgan Stanley’s head of global autos and shared mobility research, told CNBC on Tuesday that though Ford will survive the financial uncertainty caused by the coronavirus, its stock may not have bottomed just yet.

“That doesn’t mean Ford can’t go from $4 to $2 along the way — this is fluid,” Jonas said on “Squawk on the Street.” 

Jonas said the automaker has had its execution issues. But he pointed to the company’s $30 billion in liquidity in its industrial operations as well as a strong treasury and financial team born of the 2008 financial crisis, in which the company did not receive a bailout. He said the board’s decision to suspend its dividend because of the coronavirus also indicated the company’s commitment to staying afloat.

“I said that’s it — they’re all in. It’s all about survival,” Jonas said of the dividend decision, which accompanied Ford’s withdrawal of 2020 guidance last week. 

He added that Ford Executive Chairman Bill Ford “will do whatever it takes for Ford to survive” and preserve the company’s legacy. Bill Ford is the great-grandson of founder Henry Ford. 

The coronavirus pandemic has posed significant challenges for Ford. The company said Tuesday that it would not reopen its North American manufacturing plants on March 30 as originally planned because of stay-at-home orders prompted by the outbreak.

The automaker originally closed its plants in the U.S., Canada and Mexico on March 18 after succumbing to pressure from the United Auto Workers. The labor union wanted the factories closed in order to protect workers from the virus.

General Motors and Fiat Chrysler also closed their plants in North America through the end of March. GM plans to resume production on March 30, while Fiat Chrysler said it will reassess the situation at the end of its hiatus. 

Despite these setbacks, Jonas said there is much to look forward to for automakers that survive the next three months, citing the “unprecedented stimulus” of economic aid that will include direct payments to most Americans.

“You’re going to sell a boatload of cars later this year, and your stocks won’t just recover, they’ll multiply,” Jonas said. 

Jonas also described the country’s current “war-like environment” that has prompted automakers like Tesla, Ford and GM to begin working with medical partners to manufacture equipment such as respirators. Tesla CEO Elon Musk has shown a particular ability to rally public-private partnerships, Jonas said. 

This kind of humanitarian effort is a good tactic against bankruptcy, according to Jonas.

“If there is a moment where auto companies, including Tesla, need to go to Washington and say, ‘Hey, we’re too important to fail,’ they need to show that they did everything they could,” he said. 

Leave a Reply

Back to top