The writer, a Los Angeles freelancer, is a former Detroit News business reporter who blogs at Starkman Approved.
By Eric Starkman
It’s a good thing the Detroit Free Press’ auto writers aren’t assigned to cover ecology in Oregon. When it comes to writing about GM and Ford, they can’t see the forest for the trees.
My head is spinning after visiting the Freep’s website Thursday morning and seeing this story suggesting that money manager Cathie Wood’s modest investment in GM offsets famed investor George Soros’ decision to dump all his GM stock. For those unfamiliar with Wall Street, naming Cathie Wood in the same breath as George Soros is akin to representing Little Caesars as the culinary equivalent of the London Chop House.
Wood made a name betting on disruptive technologies, particularly Tesla. For a time, Wood looked like an investment genius, but Tesla and the hype surrounding Wood’s other major holdings have run out of steam. Wood’s flagship fund is down nearly 80 percent from its high a year ago.
Some investors think so little of Wood’s money management prowess there’s a fund that bets against Wood. That fund is up more than 90 percent since its launch last year.
By comparison, George Soros is widely considered one of the greatest investors of all time. That’s why he has a net worth estimated at $8.6 billion. Wall Street pays close attention to Soros’ investment moves, and when he clears his fund of an entire position, investors take notice.
The Freep in its story referred to Wood as “a star stock picker” but neglected to mention that her fund is badly underwater. Perhaps the person who edited the story in Kentucky, or wherever the Gannett-owned Freep is designed and edited these days (it isn’t Detroit), didn’t catch the oversight.
Yet when the Freep published this shameful puff piece on Ford CEO Jim Farley back in October, it couldn’t stop raving about how he goosed the company’s stock price with all his lofty talk about taking on Elon Musk. The Freep celebrated what Farley did for Ford’s stock price in the lead.
The Freep isn’t looking too smart these days. While Ford’s stock gained 140 percent in 2021 and hit a record high in January, the shares have fallen mightily since then, recently hitting their worst levels in nearly a year. Investor’s Business Daily, a publication focused on technical fundamentals, not hype, ranks Ford far below most of the public companies with positive technical ratings.
GM’s stock also is languishing, getting little respect from Wall Street or from Investor’s Business Daily, the latter seemingly having developed an immunity to Barra’s and Farley’s EV Kool-Aid.
Soros’ fund dumped its entire 1.26 million GM shares. The Freep quoted U of M business prof Erik Gordon as saying Soros’ holdings were insignificant given that GM has 1.4 billion shares outstanding. If Soros’ sale was insignificant, Wood’s GM purchase is even more so. Wood only acquired 158,187 GM shares. The exploratory purchase isn’t even a rounding error in the fund, which has more than $50 billion in assets.
Wood has publicly explained her fund’s meager investment. “We're still on a fact-finding mission,” Wood recently told Yahoo News.
Gordon, the U of M prof, alerted the Freep the importance of Soros bailing out of GM.
Anticipated a Bruising?
“If (Soros) sold some of the shares, it could be, ‘I’m just rebalancing my portfolio, but I still have faith in them,’” the Freep quoted Gordon as saying. “I read this as Soros has sold out and gotten out of GM, that’s how I read it as another investor. Why is he getting out? Who knows.”
One possible reason why Soros got out is that he correctly anticipated that GM’s stock was cruising for a bruising. A spokesperson for Soros pointed out to the Freep that the investor sold his GM shares 45 days ago, so Soros correctly anticipated the stock’s decline.
Therein is an example as to why Soros is considered one of the best investors of all time.
The Freep should also be embarrassed by it decision to downplay the importance of this AP story that Ford is recalling 350,000 of its cash cow SUVs, including 39,000 “that should be parked outdoors because the engines can catch fire.”
Electric vehicles are known to catch fire – just ask those who bought Mary Barra’s Chevy Bolts – but I’ve never heard of gas engines mysteriously catching fire when turned off. Ford has serious other problems as well.
The company also recalled 464 electric Mustang Mach-E SUVs from 2021. A software problem can cause unintended acceleration, deceleration or a loss of drive power in all-wheel-drive vehicles.
The automotive trade press has reported that Ford Bronco engines are dying with less than 10,000 miles and problems are emerging with Ford’s Maverick. Ford’s F-150 was subject to nearly a dozen recalls last year.
Some of the Freep’s readers strike me as considerably more knowledgeable about the automotive industry than the reporters who cover it. A reader named Aaron S. posted this insight: “Ford has no in-house technical expertise so they aren't in control of the development nor assembly the way they should be. A decade of 'cost reductions' has eliminated too much valuable experience, so the younger/CHEAPER personnel are basically learning on-the-job, the hard way. It has nothing to do with parts shortages or suppliers nor "the uaw", as Ford is exhibiting uniquely poor quality, plagued by problems no other OEM experiences.”
The Freep has previously reported about Ford firing some of its most experienced and high performing managers, so it’s a discrimination issue that even the publication’s auto writers are aware of.
Legends in Their Minds
Barra and Farley were respectively paid $29 million and $23 million last year, and while they might be management legends in their own minds, it’s hard to see how they were even remotely deserving of their obscene compensation. Building electric vehicles is considerably more difficult than gas powered vehicles and given that GM and Ford haven’t mastered manufacturing gas vehicles with more than a century of experience, it’s hard to imagine they will master EV manufacturing right out of the gate.
According to data compiled by ISEECARS.com, GM and Ford are the global industry leaders for recalls, respectively with 213 and 209 recalls in the past five years. Cathie Wood in January declared that GM and Ford “don’t have the DNA” to make it in the electrical vehicle space, and that both companies were in peril of going bankrupt.
Even Tesla is still figuring things out, as the Muskmobiles are notoriously problem plagued and subject to recalls. The difference is that Musk is adored by Tesla fans, and Barra and Farley command no such loyalty, except from the general automotive press.
In Los Angeles, where I live, Teslas are seemingly everywhere. I can drive miles without seeing a GM-made car, and when I do, it’s likely a tourist driving a rental. California is the epicenter of electric vehicles, and the GM and Ford brands don’t have much cache here.
Barra and Ford are winning over the media with their EV hype, but there are some very experienced automotive executives, including the CEOs of Toyota and BMW, who say the conversion to electric vehicles is happening too fast and without sufficient thought and planning. Stellantis CEO Carlos Tavares last week joined the chorus.
Farley seems a tad worried that CEOs of auto companies more highly regarded than Ford might be right. Why else would Ford petition the European Union to ban the sale of new gas and diesel engine cars by 2035? Farley has bet the entire Ford farm on electric vehicles; if the shift to electric vehicles is delayed Ford is doomed.
Farley has already lined up a second career. Bloomberg reported that he’s set to launch a podcast on Spotify. Farley excels at shooting the breeze, so look out Joe Rogan!
In the meantime, owners of Ford’s shoddily made vehicles better hope the automaker keeps its dealers around for many more years. Who else is going to handle Ford’s myriad recalls?
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