A new Jeep model is parked in the parking lot of a Dodge Chrysler-Jeep Ram dealership on October 3, 2023 in Miami, Florida.
Joe Reddell | Getty Images News | Getty Images
Detroit – Last Stock Ford Like last week, it fell more than 18% in one day, with the U.S. auto industry on the brink of bankruptcy amid the Great Recession.
Ford avoided bankruptcy in 2008-2009 and was far from any such disaster, but its stock price plummeted after the company missed Wall Street profit expectations, a prime example of the uphill battle the automaker faces the rest of the year. .
The U.S. market – the profit engine for most automakers – is normalizing after years of record high prices, low vehicle inventories and strong demand. Inventories, especially at Detroit automakers, are building while vehicle prices are slowly falling.
Wall Street has been waiting for this to happen for some time, as the cyclical nature of the auto industry is heading toward a downturn.
Ford, General Motors and Stellantis stakes
Morgan Stanley analyst Adam Jonas said on Friday, “Investors who think the auto industry can outperform on earnings growth and buybacks should think twice. Auto fundamentals may be peaking (see Incentives and Investors who bought back to beat the market should think twice. Auto fundamentals may be peaking (see rising incentives and delinquencies).
Jonas’s comments came after the firm last week downgraded GM to equal weight from overweight, adding that “the auto industry remains one of the world’s largest in terms of competition, overcapacity, cyclical and long-term risks.” One of the most challenging industries.
Industry challenges add to the personal problems for each automaker and the uncertainty surrounding the adoption of all-electric vehicles, where automakers have invested billions of dollars but are still largely unprofitable.
Ford shares had their worst week since March 2020, falling 20% to close at $11.19 on Friday. General Motors fell 8.7% last week to $44.12. Stellantis fell 12.6% last week to $17.66.
General Motors
for General MotorsWall Street analysts said investors were hesitant about a pullback in growth businesses, with momentum weakening in the second half and worried that the automaker’s profitability had peaked.
Selling more electric vehicles is one of the reasons why General Motors has raised its annual financial guidance twice this year, and it expects second-half results to be weaker than those in the first half. The company expects second-half adjusted earnings in the range of $4.7 billion to $6.7 billion, or $3.82 to $4.82 per share. This compares with adjusted earnings per share of $8.3 billion, or $5.68, in the first half of this year.
The automaker also expects vehicle prices to fall 1% to 1.5% and incur $1 billion in additional expenses, including $400 million in additional marketing costs to support vehicle launches. GM is looking to increase production of its loss-making electric vehicles as it aims to make the vehicles profitable on a volume or contribution margin basis by the end of the year.
Analysts have also expressed concern about GM’s continued losses in China, which has been the company’s profit engine. The automaker’s China operations recorded an equity loss of $104 million, the unit’s second straight quarterly loss after hitting a roughly 20-year low in 2023.
“We have been taking steps to reduce inventory, adjust production to meet demand, protect our pricing, and reduce fixed costs. But it is clear that the steps we are taking, while important, are not sufficient,” said GM CEO Mary Barra Weeks 2 means that during this period The company’s earnings call. “We expect the remainder of the year to remain challenging.”
The automaker is still expected to report strong results in the second half of the year, building on its strong cash flow position and conducting billions of dollars in share buybacks to return money to investors.
Ford
That’s not the case for GM’s closest crosstown rival, Ford, which opposes any share buybacks and instead relies on the company’s dividends to reward investors.
Several Wall Street analysts pointed out the differences in share buybacks between the two companies, citing The Ford family has voting control of the board of directors and special shares.
“Given the increase in cash balances, there had been hopes for a special dividend or even a buyback. In hindsight, this may have been just investor pressure compared to GM’s policy. However, Ford does not appear to be changing its stance.” UBS analysis analyst Joseph Sparks said in an investor note Thursday.
The new Ford F-150 truck rolls through the assembly line at the Ford Dearborn plant on April 11, 2024 in Dearborn, Michigan.
Bill Pugliano | Getty Images
Ford expects adjusted profit in the second half to be between $2 billion and $3 billion, down from $5.5 billion in the first half.
company 2024 guidance reconfirmed Although second-quarter adjusted earnings per share were 21 cents lower than expected. The automaker reported an $800 million increase in accident warranty costs compared with the previous quarter.
To deliver second-half results, Ford Chief Financial Officer John Lawler changed the company’s guidance for the final six months of the year for its legacy Ford Blue and commercial Ford Pro businesses. Ford Pro’s full-year EBIT is expected to be $9 billion to $10 billion due to further growth and a favorable product mix. However, guidance for the company’s Ford Blue division was lowered to a range of $6 billion to $6.5 billion, reflecting higher warranty costs.
“We are capital disciplined, have the right product mix and we are delivering continued cash generation to reward our shareholders,” Lawler told investors on Wednesday. “We are relentlessly looking for new ways to improve our business and Continue to focus on driving quality and cost improvements.”
Strantis
Transatlantic carmaker Stellantis faces arguably its most challenging second half of the year, particularly for its U.S. operations.
When interviewed by the media, Stellantis CEO Carlos Tavares said many of the company’s problems stem from its U.S. operations, which he has previously said were hurt by “arrogant mistakes” in vehicle inventory levels, manufacturing and sales strategies. Impact.
Last year, Stellantis was the only major U.S. automaker to report a sales decline from 2022.
The company’s U.S. sales fell about 16% in the first half of this year. Its North American market share was 8.2%, a decrease of 1.8 percentage points.
Stellantis CEO Carlos Tavares holds a press conference on January 23, 2024 before visiting the Sevel carmaker’s factory in Atesa, Italy, the largest van manufacturing plant in Europe.
Remo Cassili | Remo Cassili Reuters
Despite ongoing issues, Stellantis reiterated its 2024 guidance of double-digit adjusted operating margin, positive industrial free cash flow and at least €7.7 billion of capital available to investors in the form of dividends and buybacks Return.
In the first half of this year, Stellantis’ adjusted operating margin was 10%. Its free cash flow was negative 392 million euros and its return on capital was 6.65 billion euros.
Tavares expects to achieve these goals by launching 20 new models this year, correcting problems in the U.S. market and further cutting prices to increase sales. He also did not rule out the possibility of further layoffs.
“This is a very difficult industry, a very difficult time, and everyone has to fight for performance,” Tavares said. “We have to work hard to achieve a performance like this.”
– CNBC Michael Bloom contributed to this report.
About The Author
