Good companies have an obligation to their stockholders. But it’s a bigger obligation than raising the dividend. They have an obligation to keep their company alive, not just this year, or next, or the year after that. [inlinetweet prefix=”” tweeter=”” suffix=””] Sometimes, you have to use your profits for the growth of the company and not pay them all out in dividends to impress the stockholders with your management record.[/inlinetweet] Stop growing, and you die! [inlinetweet prefix=”” tweeter=”” suffix=””]Turn your back on experimentation and planning for tomorrow because they don’t contribute to dividends today and you won’t have a tomorrow because there won’t be any company.[/inlinetweet] Ford, it seems, doesn’t believe in this philosophy.
Ford Motor Company, the company that invented mass productions, has decided to eliminate their car line, except for a few models, as part of a cost cutting move. They rationalized their strategy by saying consumers aren’t buying cars anymore, just SUV’s and truck, but everyone in the car industry is fully aware that car trends tend to cyclical. What’s hot today may be cold tomorrow. Honda’s Accord was a hot brand, but Honda can’t give them away because Honda’s styling is boring.
In addition to getting out of the car business Ford is cutting marketing expenses as well. This is what happens when you hire a bean counter as CEO. Steve Jobs knew that when sales were down it was the best time to invest in the brand and innovate, but Ford seems only interested in shareholders and pleasing the Ford family.
To say that is a mistake would be a huge understatement. Ford is making a mistake here to please analysts on Wall Street who are only interested in short term stock prices. Rumor is that GM is also being pressured to get out of the car business. I hope they don’t make the same mistake. What will bring back car sales? Innovation and styles that people actually want! Not cost cutting.