Ford recently lowered its expectations for the fiscal year 2015 by over $1 billion.
This is largely due to present and future losses in South America and Europe; Ford stock was down over 7% on the news.
Ford's peer Tesla has moved up in contrast, posting solid revenues, and with a strong market performance.
While Ford management suggests current losses are indicative of investments that will yield future gains, we suggest investors hold off on initiating positions until profitability is more clearly defined.
Goldman Sachs downgrades Ford (NYSE:F) even though shares have slipped more than 20% during the past three months.
The firm cuts Ford to Neutral from Buy with a $17 price target, lowered from $21, noting that the stock looks cheap but might be "dead money in the near-term" as it now expects Y/Y EPS declines until Q2 2015 since the ramp up in truck production looks like it will happen more slowly than expected, with the F-150 not producing at full capacity until H2 2015.
Also, Goldman foresees less cash deployable to shareholders given lower EBITDA and higher capex spending relative to previous forecasts, plus annual pension contributions of $1.5B over the next two years.
GM is removed from Goldman's Americas Conviction List but remains Buy-listed, as the firm sees some pressure on North American margins next year.
The EPA says the fuel economy of 2013 models sold in the U.S. averaged 24.1 mpg, up half a mpg from the prior year's model.
The modest 2.1% improvement is below the pace called for by some environmental groups and just a fraction of what would be needed to keep pace with the government's target for a 54.5 average mpg for the 2016 model year.
A higher mix of SUV and truck sales offset technology gains by automakers.
Fiat (OTCPK:FIATY) CEO Sergio Marchionne thinks there is room in the industry for a merger to create an automaker bigger than Toyota.
Marchionne might be the man for the job after helping guiding the acquisition of Chrysler from Daimler and pushing Fiat through a complicated transaction to create Fiat Chrysler Automotive (NYSEARCA:FCA).
Morningstar analyst Richard Hilgert agrees that the auto industry may see more M&A activity due to the needed economies of scale to compete.
General Motors (NYSE:GM) shares sank 5.8% today to a new 52-week low after Morgan Stanley said GM's overseas risks are the same as those taking a big bite out of Ford's (NYSE:F) earnings.
“Ford’s reduced outlook was based on increased macro pressure in Russia, Latin America and FX and quality-related issues,” Morgan Stanley's Adam Jonas wrote in cutting his price target for GM shares to $27 from $29, adding that “GM’s exposure to each of these factors is at least as great as Ford’s."
GM has targeted a North American EBIT margin of 9%-10% by 2016, but Jonas forecasts only 7.2% in 2016 and 5.8% in 2017; while "a 10% margin is technically possible," Jonas wrote, "when we consider the full balance of risks and opportunities facing [North America's] light vehicle industry in terms of volume growth, mix, content and pricing, we believe a margin of 0% has a similar probability."
Ford also tumbled to a 52-week low today, falling 2.9%.
Ford (NYSE:F) reports a drop in sales for cars and trucks, while sales for utilities rose 1.5%..
The automaker has tempered its volumes in anticipation of new model introductions.
Sales growth by brand: Ford -3.2% to 172,918; Lincoln +12.5% to 7,257.
Sales growth by model: Ford Fusion +8.6% to 21,693; Ford Fiesta -17.0% to 4,185; Ford Mustang -28.6% to 3,158; Ford F-Series -1.0% to 59,863; Ford Explorer +0.8% to 13,770; Ford Transit (new) 1,255; Ford Transit Connect +29.6% to 4,132; Lincoln Navigator +23.8% to 1,013.