Bob Lutz blames fascination with Musk for dismissal of Ford's CEO

[David29]

My Road & Track magazine came today. It did not particularly interest me because it was a special issue devoted to Japanese cars. But I paged through it anyway. The last page is always the monthly "Far Afield" column by the irrepressible Bob Lutz. His topic was how "Mark Fields, Ford's successor to the brilliant Alan Mulally, was unceremoniously removed from his CEO position by a restive board and a gaggle of Ford family members." I knew nothing of the background, but read the column because Lutz is always strongly opinionated and often entertainingly colorful.

It turns out his theme is that Mark Fields' considerable accomplishments were not enough to keep him "...in an era where Wall Street uses the peripatetic Elon Musk as the standard by which automotive CEOs are measured." He goes on to describe what he sees as the fascination that Musk and Tesla hold for "newly minted Harvard MBA analysts," despite Tesla's lack of profits and the unproven reliability of the cars. "Musk, the ultimate pitchman, draws an irresistible vision of the transportation future. Tesla's stock defies gravity and all conventional business logic. Ford's shareholders, holding $11 shares, naturally became envious."

He concludes by saying, "Poor Mark Fields, a good legacy CEO, was no longer fit in a world where promise and hype outclass perseverance and financial performance."

So Musk is now the standard of automotive CEOs! Who knew? Pretty heady stuff.

 

[ItsNotAboutTheMoney]

Ah, Bob. He can't help himself.

What had the Ford board agitated is that the US market has peaked so they're wondering where the money will be coming from. China and Europe are effectively both going PEV, GM has the Volt and Bolt, Nissan has the Gen 2 Leaf coming, the Germans are going electric and Ford doesn't seem to have anything really interesting.

 

[renim]

Field's reminded me of a CEO who was building the company but not the shareprice.

The signature direction that Field's was implementing was to reinvest Ford's profits into Ford's auto loans.

That is decision is anathema to short term share price appreciation or share buy backs.
It was a grow slow, grow steady philosophy, with considerable resilience.

but that is not what share holders want.

 

[shrspeedblade]

I like Bob Lutz in much the same way one likes Archie Bunker, and for many of the same reasons!

 

[Akikiki]

I've been watching for Bob to blame Elon for N. Korea's ICBM launch successes

 

[cwerdna]

So Musk is now the standard of automotive CEOs! Who knew? Pretty heady stuff.

You do have to give credit to Musk for getting TSLA's market cap (currently) past that of GM and Ford. Yet TSLA, since publicly reporting has lost money almost every single quarter, with net losses (including the few profits) of about $2.9 billion since they started reporting publicly.

Companies the size of GM produce about 10 million vehicles/year. Automotive News: In Just 3 Days, GM Sells More Vehicles Than Tesla Did In All Of 2016 is about right.

For GM's most recent quarter: General Motors earnings beat but concerns loom about sales, inventories, for that quarter alone they had net income of $2.4 billion and revenues of $37 billion.

In comparison, the most recent quarter we have for TSLA: Tesla losses grow as it nears Model 3 launch : $330 million loss on $2.7 billion of revenue. We'll hear their next earnings report on August 2nd...

And beside the market cap, there's all the buzz about Tesla (mostly via hype), the company, its vehicles, its image, mindshare amongst the public beside the.... errr passion about it here and in other places. Not that long ago (well, a few years), even though numerous other EVs were shipping, I've talked to people who thought Tesla was the ONLY EV manufacturer.

 

[KarenRei]

Yet TSLA, since publicly reporting has lost money almost every single quarter, with net losses (including the few profits) of about $2.9 billion since they started reporting publicly.

Yes, that's what happens when you rapidly grow a company. Pretty much by definition.

Stocks are valued based on what people think the company's future earning potential, not what it presently is. So TSLA isn't priced based on the company's model S sales, or even what the Model 3 sales will bring - it's factoring in the potential for the Y and many future lines as well, as well as non-vehicular side products.

 

[sandpiper]

...He concludes by saying, "Poor Mark Fields, a good legacy CEO, was no longer fit in a world where promise and hype outclass perseverance and financial performance."

So Musk is now the standard of automotive CEOs! Who knew? Pretty heady stuff.

A "legacy CEO" might be the best during the normal course of business, where you require competent and well executed course corrections, but no tire squealing 90 degree turns. The industry is definitely heading into a set of high speed, bone jarring hairpin turns. That demands a different sort of a person, with a strong stomach for chaos and bloodshed.

 

[McRat]

Yes, that's what happens when you rapidly grow a company. Pretty much by definition.

Stocks are valued based on what people think the company's future earning potential, not what it presently is. So TSLA isn't priced based on the company's model S sales, or even what the Model 3 sales will bring - it's factoring in the potential for the Y and many future lines as well, as well as non-vehicular side products.

Not necessarily. When GM went BK, people were trading GM stock even after a public campaign by GM to tell them the stock had no value.

Lots of DotCom examples as well of people trading stock with no eye to value or the future.

The market is dual purpose. One is for actual business use, the other is for gaming, Las Vegas style.

The gamblers need stock to go up and down, rapidly and sharply to get the both the most income (loss) and thrill.

How many years do you see it taking for Tesla profits to rank in the top three of auto producers in the world? The average age of a car on the road is over 11 years. While cars are not high turnover products like smartphones or laptops which are used for 3-5 years, there are 1+ billion cars on the road. Out of those, 0.0002 Billion are Teslas. How long before Tesla hits the 3rd most common car on the road? Once that happens, the stock valuation should be $60 billion.

But there are problems:

How many years do you think it will take before vehicle autonomy reduces retail sales numbers?
Or before the enhanced reliability of EVs increases that 11 year number.
Or before a small company does the EV thing but is better at it? (history lesson, Facebook was not the 1st, second, or third popular social network. Google was not the first second or third popular search engine.)
Or what if a new technology drops EV prices so low, that profitability per unit falls?

Even if Tesla Motors succeeds at their goals without hiccups, competition, or better competing technology, the long term plan amounts to planned obsolesce. Fewer, cheaper cars that last virtually forever. Solar providing all the power needs and 50 year panel life.

So it's certainly not as simple as "the stock is worth several times it's logical value because of the future". The problem with the future is that it's in the future.

 

[sandpiper]

...But there are problems:

How many years do you think it will take before vehicle autonomy reduces retail sales numbers?
Or before the enhanced reliability of EVs increases that 11 year number.
Or before a small company does the EV thing but is better at it? (history lesson, Facebook was not the 1st, second, or third popular social network. Google was not the first second or third popular search engine.)
Or what if a new technology drops EV prices so low, that profitability per unit falls?

Even if Tesla Motors succeeds at their goals without hiccups, competition, or better competing technology, the long term plan amounts to planned obsolesce. Fewer, cheaper cars that last virtually forever. Solar providing all the power needs and 50 year panel life.

So it's certainly not as simple as "the stock is worth several times it's logical value because of the future". The problem with the future is that it's in the future.

I don't actually believe that the price of vehicles will drop appreciably, or that autonomy (if/when it exists) will reduce ownership. Too many people get sucked into thinking that cars are transportation. Cars are transportation, as much as clothing is protection from the elements, a house is shelter, and food is nutrition. You can get ALL of these things for much lower cost than what people actually choose spend.

Like with houses, clothing and food people buy as much car as they can afford for all manner of social reasons. And if EVs get cheaper to build, fuel and maintain, manufacturers will dutifully come up with all sorts of bells and whistles that drive up the cost to the point where the selling price is what people WANT to spend.

 

[McRat]

I don't actually believe that the price of vehicles will drop appreciably, or that autonomy (if/when it exists) will reduce ownership. Too many people get sucked into thinking that cars are transportation. Cars are transportation, as much as clothing is protection from the elements, a house is shelter, and food is nutrition. You can get ALL of these things for much lower cost than what people actually choose spend.

Like with houses, clothing and food people buy as much car as they can afford for all manner of social reasons. And if EVs get cheaper to build, fuel and maintain, manufacturers will dutifully come up with all sorts of bells and whistles that drive up the cost to the point where the selling price is what people WANT to spend.

To be honest, I just don't know what the next 30 years will bring. In the last 50? Most automakers went out of business. Cars didn't use to last 10 years. Some tires go over 50,000 mi easy. Laws are getting more restrictive. Black boxes are mandatory, and soon telemetry will be. Someday having fun driving will be reserved for the wealthy on closed courses. Like hunting guns in England, only for the rich.

Let's look at what is selling TODAY. People mostly want appliances with 4 tires. Some want to wash big loads, others just wash small loads. Camrys, Corollas, Civics, Cruze, CLA (notice how appliances start with C, like Commodity?), etc. Not exciting, not dangerous, not fun. Pickups and SUVs are just for bigger loads of chores.

It appears the AVERAGE car buyer really cares nothing about driving cars, except the simpler the better. The stick shift is dying. Everything has voice navigation. And when they are on the road, they are texting the whole time anyhow.

They don't necessary WANT a car, they NEED a car. It's just a necessary evil like taxes.

So there are a lot of folk who could cut down car purchases with autonomy. Let's say wifey, hubby, and missy all need to drive. Dad goes to work, the car goes home. Missy goes to school, the car goes home. Mom heads off to her boyfriend's, car parks at Costco so the neighbors won't get nosy. Missy summons to go home, mom summons to go home, dad summons. Then it charges. Wow. The real reason for 200 miles!! Who would have guessed?

So a family of 4 drivers could probably do well with 2 autonomous cars instead of 4 normal ones. Businesses would have fleets. Low income would have co-op car pools (original definition, not new definition).

It's not the enthusiast who steers the industry, we are a very profitable sideshow that doubles as a marketing tool. It's the car atheist. Sad but true.

 

[sandpiper]

...Let's look at what is selling TODAY. People mostly want appliances with 4 tires. Some want to wash big loads, others just wash small loads. Camrys, Corollas, Civics, Cruze, CLA (notice how appliances start with C, like Commodity?), etc. Not exciting, not dangerous, not fun. Pickups and SUVs are just for bigger loads of chores.

It appears the AVERAGE car buyer really cares nothing about driving cars, except the simpler the better. The stick shift is dying. Everything has voice navigation. And when they are on the road, they are texting the whole time anyhow.

They don't necessary WANT a car, they NEED a car. It's just a necessary evil like taxes.

So there are a lot of folk who could cut down car purchases with autonomy. Let's say wifey, hubby, and missy all need to drive. Dad goes to work, the car goes home. Missy goes to school, the car goes home. Mom heads off to her boyfriend's, car parks at Costco so the neighbors won't get noisy. Missy summons to go home, mom summons to go home, dad summons. Then it charges. Wow. The real reason for 200 miles!! Who would have guessed?

So a family of 4 drivers could probably do well with 2 autonomous cars instead of 4 normal ones. Businesses would have fleets. Low income would have co-op car pools (original definition, not new definition).

It's not the enthusiast who steers the industry, we are a very profitable sideshow that doubles as a marketing tool. It's the car atheist. Sad but true.

It's all academic of course, but I don't buy it. Twenty-somethings see a car as arrival into adulthood - even if it's an 8 year old Corolla. Suburbanites debate merits of different crossovers and know the trim levels and costs. The upwardly mobile will reach for whatever they can afford out of Germany, even if it's no better than a Camry. As for pickup drivers... heck, people transfer brand loyalty down generations. Good luck switching a Chev man to a Ford.

 

[AudubonB]

I would have weighed Sandpiper's argument more heavily had Jenny and I not been shocked into speechlessness at our last visit into town: our quintessential Anchorage-suburb friend - quite proletarian, driveway quite anchored from floating away with not three but five pickups...one of which rolls coal... his seventeen-year old told us that "none" of his classmates are getting drivers' licenses. "No one's driving any more".

Even from just the perspective of North America - a dangerous one, indeed - McRat's observations appear more and more on the money.

 

[sandpiper]

I would have weighed Sandpiper's argument more heavily had Jenny and I not been shocked into speechlessness at our last visit into town: our quintessential Anchorage-suburb friend - quite proletarian, driveway quite anchored from floating away with not three but five pickups...one of which rolls coal... his seventeen-year old told us that "none" of his classmates are getting drivers' licenses. "No one's driving any more".

Even from just the perspective of North America - a dangerous one, indeed - McRat's observations appear more and more on the money.

I wonder if they feel they'll same way when they're 22? I personally haven't seen that; the kids I know get their licenses as quickly as they can after turning 16, just like we did.

 

[McRat]

I would have weighed Sandpiper's argument more heavily had Jenny and I not been shocked into speechlessness at our last visit into town: our quintessential Anchorage-suburb friend - quite proletarian, driveway quite anchored from floating away with not three but five pickups...one of which rolls coal... his seventeen-year old told us that "none" of his classmates are getting drivers' licenses. "No one's driving any more".

Even from just the perspective of North America - a dangerous one, indeed - McRat's observations appear more and more on the money.

Same is true in California. Most teens here do not drive today. That is fewer than 50%.

My teens drive Volts, and were professional trained in defensive driving on a closed course. Both have raced with me as well.

So, they are often drafted as being the drivers on outings. Folk say you can't seat 5 in a 2016/2017 Volt. I can say that's not true.

 

[Nikxice]

I think Lutz has always been frustrated and even a bit envious of Elon's coolness factor. None of the other, much slicker, legacy auto CEO's come close. With evidence that the demand for new auto sales has currently reached saturation, Tesla is ripe to take some business away from all these companies. That possibility seems to drive Lutz crazy, as he thrives on tearing into Elon at every opportunity.

The CEO's at big oil don't appear able to squash interest in EVs too. In an interview last week, even the CEO of Shell predicts the eventual drop in demand for fossil fuels. Interestingly, this guy is also planning to purchase an EV towards the end of this year.
Why This Big Oil CEO Is Buying an Electric Car

 

[svp6]

Isn't Bob Lutz a little past his prime? I will gladly ask his opinion about how things unfolded in the 20th century, but not sure he has a good grasp on how things will shape up in the 21st. And if you add his fabulous success with GM going into bankruptcy while he was responsible for Global Design and Key Product initiatives, or more recently the super hot selling VLF Destino, I really do not want to get advice from him.

 

[AudubonB]

I wonder if they feel they'll same way when they're 22? I personally haven't seen that; the kids I know get their licenses as quickly as they can after turning 16, just like we did.

I also suspect they likely will feel differently. Regardless, until we encountered that revelation, I had held the suspicion that the phenomenon McR has been reporting was reserved for...ahem...California types. Not....real...Amurricans. You know: Texans. Georgians. Iowans.

But you simply do not get more true-blue (or is it now true-red) than an Alaskan redneck - sorry, you Alabamans. So as for me, I'm calling this trend as the sea-change camel's nose under the paradigm tent.

And I abjectly apologize for that abysmal mashup of metaphors. "Coffee!"

 

[Snerruc]

From observing grand kids friends in a couple of east coast cities, many of them prefer a cell phone and Uber to the hassle of driving, parking etc. personally, I think the Model 3 is the iphone of the car industry, but it may well be obsoleted by this paradigm shift.

 

[shrspeedblade]

From observing grand kids friends in a couple of east coast cities, many of them prefer a cell phone and Uber to the hassle of driving, parking etc. personally, I think the Model 3 is the iphone of the car industry, but it may well be obsoleted by this paradigm shift.

If the Model 3 can come pick them up by itself and take them to their destination, it will be part of that paradigm shift. I actually think young people will be the "drivers" for this, as they will be far quicker to become accepting of the new technology than those of us who have driven our whole lives.