There’s an unfortunate reality we face Ford Motor Company‘s (NYSE:F) investors: Alan Mulally doesn’t walk through the doors of the Blue Oval offices. Mulally, who was the automaker’s CEO during the financial crisis, designed the company’s path forward without government assistance. And his “One Ford” vision helped the company achieve record profits in just a few years.

But Ford appears to have lost its way since Mulally’s retirement nearly a decade ago. And with the recent difficulties, is it finally time to give up on the automaker?

A stock spinning its tires

When it comes to investments that gain value over time, Ford’s shares are spinning their tires. Consider that the company has lost about 36% of its value in the decade or so since Mulally retired.

Investors are quick to point out Ford’s strong dividend, which yields 5.7%, as a reason to own the stock, and it certainly adds value. In fact, you may find that its dividend represents most of the value for investors over the long term.

F data YCharts.

As you can see, returns including dividends far exceed the stock price alone. But the chart above misses an important detail: opportunity cost. When you think about what S&P 500 Investors may find that even the strong dividend isn’t enough to keep up, despite the rise over the same time period.

F data YCharts.

A plague of problems

Ford investors, raise your hand if you’ve heard this before: Costs are driving down profits. This story began about a year ago, when management said it was billions of dollars behind its closest competitors in terms of costs; This was a huge red flag for a powerful company in the industry.

Not only is the automaker facing ongoing challenges with costs and operational efficiency, it has led the U.S. industry in recalls for three years in a row, with a significant financial impact.

In the second quarter, it spent $2.3 billion on warranty and recall costs; This was up $800 million from the first quarter and more than $700 million from the previous year. It’s a big deal that adjusted earnings before interest and taxes (EBIT) in the second quarter came in at just $2.8 billion.

Warranty costs are not the only problem for Ford as it tries to reduce the costs of its electric vehicles (EVs). The automaker’s model-e division lost nearly $3.7 billion in EBIT in the first nine months of 2024; That was just a few dollars behind the $3.703 billion in total EBIT produced by its traditional business, Ford Blue, over the same time period.

Fundamental changes

Management also faces a fundamental challenge, not least of which currently exists in battery costs. It has traditionally made the vast majority of its profits from incredibly profitable full-size trucks and SUVs. The dirty secret is that they cost only slightly more to produce than a sedan, but can be sold for two to three times the price.

This equation has led the company to very profitable years, but that date may change as the world transitions to electric vehicles. Larger vehicles, traditionally more profitable, now require much larger and much more expensive batteries, making their historical bread-and-butter products less profitable.

Moreover, about a decade ago, China was touted as the market that would become Ford’s second profit pillar, alongside the lucrative business of North America. The market was growing rapidly, it was already huge, and EV technology was ahead of the game.

Fast forward to today, and Ford is probably closer to exiting China altogether than turning it into a valuable market. The company is under attack from domestic brands that are years ahead of the curve in the technology and pricing of electric vehicles; in a market where electric vehicles accounted for 51% of total new vehicle sales as recently as July.

When you look at the automaker from top to bottom, you might get the impression that it is unorganized. For example, dealer inventories are mixed; There is approximately 112 days supply for batches at the end of September; This is well above the US industry’s 81-day average. This is important because high inventories put pressure on pricing and production rates.

What does all this mean?

As the world transitions to an EV-centric future with driverless vehicles, management faces significant challenges; Here, if you don’t need a tool very often, instead of paying the high cost of ownership, you can access a tool via a subscription (known as “tools as a service”).

Ford constantly faces cost challenges and recall concerns, has failed to make China a valuable market, and is spending billions of dollars on electric vehicle development. Above all, there is uncertainty about the profitability of its flagship products, and its strong dividend cannot make up for the difference in returns between the stock and the S&P 500 index.

For me, as a long-time Ford investor, this is my 12-month notice that unless there is significant management progress on costs, recall expenses and EV losses, I will eventually abandon the automaker and move my capital to a higher value. invest with more upside and less uncertainty. Alan Mulally isn’t walking through that door, and I’m late to realize how important that is.

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Daniel Miller They have positions at Ford Motor Company. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a feature disclosure policy.