Thank goodness for Alan Mulally and the hair shirt policy that he introduced at Ford when he cruised in (from Boeing) to take the helm at what was a very sick company.
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Financial results for the third quarter today showed that the One Ford strategy he developed is bearing fruit. With a little help from the market, America’s market leader (in that Ford is now the top brand) could soon move from the sick list to the fit list.
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The symbol of fitness will be paying a dividend… something that Mr Mulally might enjoy declaring given that he is himself a very significant shareholder.
The press conference this morning (US time) was peppered with inquiries about the missing cash handout.
Professional investors get in all sorts of a tangle when the divi goes missing. The yield funds – those which invest specifically for income – sometimes have to sell huge shareholdings where there is little prospect of a regular divi cheque.
And the growth fund managers get confused because the share price wobbles all over the place as theories on the likelihood of a future dividend ebb and flow and the behaviour of the yield fund managers changes.
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By GlobalDataMulally was deliberately non-committal: “We would like to regain our investment grade before we pay a dividend. We may decide to do it earlier.”
This was the ninth financial quarter in a row where Ford has been able to announce a profit. “The core is strong. We are just beginning to see the benefits of the Ford Plan.” It’s his plan of course. The job’s been a good ‘un only since he took the chair of the company.
He has a nice soundbite as ever for the simplicity of the marketing plan: “We must produce more of what people want at lower cost.”
There is pressure from commodities pricing. Copper, aluminium and lead are all costing the earth. There is not much pressure on volume. People still want to buy his products. They just expect to pay less because everywhere you look there are deals.
And the consumer is behaving himself. Credit losses versus expectations are “extraordinarily good.” There are fewer end of lease returns as well and credit terminations are slowing.
Tsunamis and earthquakes have taken their toll on luxury car sales. Ford has been unable to get delivery of all the satnav units they need for their high end models, for example, because suppliers are located either where it has been very wet or where factories were shaken to bits.
Then the conversation lurches back to another question on dividend and Mulally (after conceding that the accounts show he has generated a handy $8bn of free cash) tries again to say something meaningful: “We are not thinking of paying a token dividend. And we do not want to start paying and then drop or stop the payments.”
A little more chatter; a bit of banter and here at the death of the press conference comes that same old question again.
“Paying a dividend is a high priority,” he says.
Mulally can never be accused of losing focus. Building cars and growing market share are the issues. Mailing divi cheques will remain on tomorrow’s agenda.
