Ford Won't Buy Tesla, But a Partnership Makes Sense

The valuation of Tesla may cause interested parties to look to build alliances rather than commit fully to the future of electric vehicles.

Jan 5, 2014 at 3:04PM

Looking in the rearview mirror for too long and not concentrating on the road ahead is dangerous for drivers. That same logic hold true when considering investing for the long-term, namely because past performance is not indicative of future results. Therefore any potential suitor for Tesla Motors (NASDAQ:TSLA) should focus on how this still very young company can develop its battery technology.

Recent market rumors have suggested Ford (NYSE:F) or General Motors (NYSE:GM) could look to acquire Tesla, but while there can be a case for both companies to make such a move, the valuation of Tesla's stock close to $19 billion may impede any real internal M&A discussions despite Ford's $26 billion cash hoard and concern for challenging hybrid sales and, in GM's case, a 3% year-over-year decline in sales volume for the Chevy Volt. However, recent headlines regarding fire-related problems for the Model S may have Elon Musk more willing than ever to still get out while the getting is good so he can concentrate on Space X, SolarCity, Hyperloop, or whatever comes next.

With Ford not looking to rely as much on pickups and SUVs and anticipating a major portion of its sales lineup in the next decade will come from EVs, I'm more inclined to think Ford is positioned more strongly to acquire Tesla, especially since GM has a rookie CEO. With that said, I do think a strategic relationship with Tesla over an outright acquisition makes better sense for Ford or GM since EV costs are still high, range is still an issue and total EV sales represent less than half of 1% of auto sales.

Ford's conservative spending after its 2009 restructuring is another reason why a partnership with Tesla could may make better sense from a financial perspective. I also don't think Ford has been planning a George Steinbrenner-like Yankee managerial move by discontinuing Mercury and selling Jaguar, Land Rover, and Volvo, all in an effort to build cash to acquire Tesla. The wildcard that could make a Tesla acquisition more credible is the willingness to pay the huge price tag as a means to help offset upcoming EPA CAFE standards, which will see mpg go from 27.5 to 37.8 by 2016.

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John Licata has no position in any stocks mentioned. You can follow John on Twitter @bluephoenixinc.The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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