Idea From Motley Fool’s Jason Hall: Tesla Should Buy Ford. What Do You Think?
Earlier this month, Tesla CEO Elon Musk mentioned that he could have a conversation about merging with another automaker — this was while receiving the 2020 Axel Springer Award in response to a question about this. It is a matter many at CleanTechnica have wondered about a great deal and written about a bit. In the interview with Axel Springer CEO Mathias Döpfner, Musk replied:
“Well, I think we’re definitely not going to launch a hostile takeover,” he said. “So, I suppose if there was a friendly one, if somebody said, ‘Hey, we think it would be a good idea to merge with Tesla,’ we certainly could have that conversation. But, you know, we don’t want it to be a hostile takeover sort of situation.”
Fast forward a couple of weeks later and we have Jason Hall, host of the Motley Fool Live, making an interesting suggestion:
“I want to make a proposal to Tesla. This is something that Elon Musk recently said, that he would be listening if approached about discussing merging with another large automaker. I think it’s time that Tesla needs to make a serious concerted effort to buy Ford Motor Company. I know some of you out there are either laughing or going through some version of outrage right now. Your outrage could be because of two very different impressions of Tesla and Ford.”
I admit, the idea does seem a bit off since many will see it as a distraction for Tesla, but I think we should take a moment and just listen to Hall’s idea before saying “No, you’re crazy” and moving on. Hall shared his screen in the video and pointed out that Ford had less than a $37 billion market cap. He also noted that Tesla is selling $5 billion of stock because it. is “so rich right now.” Which is smart — if there is great deal of a demand for that stock, sell some to get more cash while it’s cheap and easy.
Continuing on, Hall shared financial metrics for the past three years. Ford Motor Company, he pointed out, has consistently generated more than $16 billion in cash from operations, which skyrocketed after its most recent quarter to almost $23 billion in cash from operations. Compared to Tesla’s billions, this is more cash flow. “Again, it’s enormous how much free cash flow Ford Motor Company generates.”
Why This Matters
Hall noted that this matters because one of these two companies has not gotten to a significant global manufacturing scale and one has — and that is Ford. Ford has plants around the world, expertise in manufacturing at the kind of scale Tesla needs to get to “if it’s going to be worth what investors are paying for the company today.”
Ford is also developing its own battery technology, and Hall noted that it has the potential to become a solar company that could manufacture solar panels and install them.
Something Easy To Miss
Something that is easy to miss, Hall pointed out, is that if Tesla was to disappear overnight, it would still leave behind its impact. Tesla has fundamentally changed the automotive industry, and it changed the way automakers think about cars — and also the future of automaking. That future looks different today than it would have if Elon Musk hadn’t helped found Tesla and grow it to where it is today. But …
If You Really Want To Change The Auto Industry, Take Over Ford
Hall gets to the core point of his message here:
“Now, you really want to change the global auto industry? Change it from the inside. Take over Ford, start rebuilding everything they do, accelerate every single timeline that they have about shifting away from internal combustion engines, and that’s how, Elon Musk, that’s how you get to the EV future that you think is going to be the way people travel around the world.”
However, for this to happen, this would require the Ford family, which still has de facto control of the company, to allow Tesla to take the bold step of changing its company from the inside out.
“So, I’m not really even talking to Elon Musk, I’m talking to the Ford family. I think that the best thing for the automotive industry that could happen, honestly, would be for Tesla to take this bold step and start changing it from the inside out.”
Hall noted that this probably won’t happen, especially since the Ford family owns shares that pretty much control a majority voting state between the family and affiliates and relationships that they have with other large shareholders — they can say no to any deal.
My Thoughts
As for now, the idea seems great, but I’m neutral on it. I own shares in Tesla and feel that Elon Musk knows what he’s doing — he’s gotten the company this far despite the crazy odds against him. He’s also had that same success with SpaceX — defying the odds with his crazy boldness and mentality of not giving up.
So, if Tesla and Ford were to cut a deal, I’d support it as a shareholder — because I believe in Elon Musk. But I also agree with Hall — I doubt the Ford family would want to give up that control. Think about it — this is their family legacy and its been in their family for all of their lives. It’s all they’ve known. I can imagine they would wonder how their ancestors would feel and how they would stress over this. Would it be right for the company?
Such doubts plague many people when facing something new, challenging, and risky — especially if accepting that risk means that you let go of your control and let someone as wild and daring as Elon Musk take over. They may not have the same faith in Elon as I or any other Tesla shareholder/fan/owner may have in Elon, and this could terrify them. So, I totally understand why they probably wouldn’t do it.
But think for a moment: if that option was there and if both agreed for Tesla to take over Ford, do you think this would be the right thing for Tesla? For Ford? For us, the consumers? Do you agree with Jason or disagree?
Editor’s Addendum
Similar to Johnna, I’m ambivalent. However, I think the core point is an appealing one. Elon’s core mission with Tesla was to accelerate the industry’s transition to electric vehicles (and sustainable energy sources). From the outside pushing in, he’s having tremendous success, and Tesla keeps adding pressure day after day. However, I think there’s no doubt that if Elon was also in charge of a legacy automaker like Ford, he’d make it transition faster, and more effectively (imho). And that’s the goal. That’s the point. When starting Tesla and along the way, the concept was simply to push from the outside. At this point in time, Tesla is so successful that it could take over some legacy automakers and push from the inside as well. All the merrier. That said, if Tesla does happen to swallow up another legacy automaker or two, I don’t think it will be Ford. I don’t think the family is letting go of the reins. —Zach
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