What happened
Shares of automotive giant Ford Motor Company (F 1.66%) raced ahead a healthy 5.6% in 11:30 a.m. ET trading Tuesday, joining a stock market rally as the S&P 500 recovers from a (mild) sell-off yesterday, and tacks on nearly 2% itself.
That's the good news. The bad news is that Ford's rally may not last.
NYSE: F
Key Data Points
So what
Investors are feeling frisky today as reports that interest rate hikes by the Fed later this month may not be as severe as earlier believed. They're probably also anticipating a strong Q2 earnings release from Ford itself, which is expected to report next week that its quarterly sales surged as much as 42% year over year, and that its profits more than tripled ($0.44 per share is the prediction).
Whether or not Ford meets those expectations, however, I have to say that the latest news out of Dearborn is not at all good.
On the one hand, yesterday Ford unveiled its new F-150 Raptor R "performance" pickup truck, a 700 horsepower, V8 beast of a machine that can produce 640 foot-pounds of torque -- and will cost at least $109,145. Ford fans surely hope the high price tag will provide a turbocharge to profits, but I have to wonder whether marketing a $100,000-plus truck -- that isn't even electric -- on the cusp of a recession is really Ford's best play here. Gas prices remain awfully high, after all, and while Ford has not (yet) published an mpg rating on the truck, the fact that the F-150 Raptor R comes equipped with a 36-gallon fuel tank suggests this one's going to gulp gas like it's Gatorade on a hot day.
Now what
So suffice it to say I'm not terribly optimistic that the new pickup will move the needle for Ford -- at least not forward. Meanwhile, here's some other Ford news that will most decidedly move the needle in reverse:
Ford is recalling more than 100,000 late-model hybrid vehicles over concerns that "in the event of an engine failure, engine oil and fuel vapor may be released into the engine compartment and accumulate near ignition sources such as hot engine or exhaust components, possibly resulting in an engine compartment fire." That sounds bad, and what makes it worse is that among the trucks being recalled is Ford's highly rated and insanely popular Ford Maverick pickup truck.
That's the one that The Wall Street Journal's Dan Neil recently praised as "light but solid, fun to drive, easy to park, eager to please" -- and boasting a monster 42-mpg fuel efficiency rating at a "cheap, cheap" base price of less than $20,000. (Yes, you read that right. A cheap price and great gas mileage in an era of $5 gas -- and on a pickup truck!)
Simply put, Ford just shot itself in the foot with this recall. Adding insult to injury, GreenCarReports.com warns that to fix what ails the Maverick, Ford may have to cut the truck's fuel efficiency. And adding more injury to the insults and injury already incurred, Ford will need to install a "modified under-engine shield," "active grille shutter components," and "additional drain holes" -- none of which sounds like a cheap and easy fix.
Long story short, this is not a good reason for Ford stock to be going up today -- no matter what happens with earnings next week.
