Same industry, two increasingly different companies

Same industry, two increasingly different companies
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Jim Farley, CEO, Ford, left, and Mary Barra, CEO, General Motors

Reuters; General motor

Detroit – “Same industry. Two different companies.”

Influential Morgan Stanley auto industry analyst Adam Jonas recently described General motor And Ford engine – bitter rivals for over a century.

The two have consistently tried to outdo each other in terms of new car sales, performance and styling. GM has gained an edge in recent years behind improved finances and early moves into electric and autonomous vehicles. GM most recently reported Third quarter results that, Compared to FordKnocked out of the park.

Investment cases for America’s biggest automakers are increasingly diverging as the companies — separated by just $1 billion in market value — take different tacks around electric and autonomous cars.

GM is also diversifying as much as possible around its emerging battery and self-driving vehicle businesses, along with a plan Offer exclusively electric vehicles by 2035. Ford is also moving into EVs, but at the same time continuing to invest in its traditional businesses. Ford expects electric cars to account for at least 40% of its global sales by the end of this decade.

(Both companies have continued to rely heavily on traditional sales of high-margin pickups and SUVs in the meantime, renewing their focus on the segment and leveraging billions of dollars in profits to pad investments in autonomous and electric vehicles.)

Wall Street analysts say they could be one of the Detroit automakers to differentiate itself when, or if, it looks at growing segments.

“It’s a very competitive industry, and they’re all very fast followers in that regard,” said Edward Jones analyst Jeff Windau. “It becomes difficult to really differentiate over a long period of time.”

Ford is undergoing a major restructuring as part of CEO Jim Farley’s turnaround plan. Called Ford+. Meanwhile, GM cut costs Years ago under CEO Mary Barra.

“GM is definitely in high gear right now with the big difference in margins between the two companies,” Morningstar analyst David Whiston told CNBC. “GM went through a lot of pain a few years ago.”

GM is seeing steady improvement in chip shortage challenges, CEO Mary Barra said

GM is quick to note its differences from Ford and may do so again during an investor event on Thursday. But the message never seems to catch on.

Wall Street maintains an average rating of “overweight” on both stocks, according to analyst reports compiled by FactSet. Both automakers are off more than 30% this year amid investor concerns that their days of profiting during the coronavirus pandemic are behind them in light of rising interest rates, inflation and fears of a recession.

Both stocks carry market caps of about $54 billion — although GM trades at roughly $40 a share and Ford trades at around $14 a share — and trade similarly to each other.

Autonomous investment

Ford announced this late last month Dismantle its Argo AI autonomous vehicle unit Says it doesn’t believe in the business or its monetization potential in the near future.

“It’s become very clear that profitable, fully autonomous vehicles are still a long way off,” said John Lawler, Ford’s chief financial officer. He told reporters on October 26. “We also concluded that we don’t have to develop that technology ourselves.”

Ford reported a 10% year-over-year drop in US sales in October

A day earlier, GM Cruise CEO Kyle Vogt offered bullish comments about the growth of his company’s robotaxi business, including a “rapid scaling phase” with “meaningful earnings” starting next year.

“We see an increased separation between companies operating commercial driverless services and those still mired in disillusionment,” Vogt said, virtually presaging Ford’s announcement that it would dissolve Argo. “What’s happening here is companies with the best products are stepping up and accelerating.”

Cruise recently said it is expanding its robotaxi service to cover most of San Francisco. It came months after the company commercially launched its fleet of self-driving vehicles during limited hours at night.

“GM clearly sees this as a long-term opportunity that they want to be a part of,” said Sam Abulsamid, principal analyst at Guidehouse Insights. “Ford is saying, ‘We think they’ll get there eventually, but it’s going to take a long time, and we’ve got other fish to fry right now.'”

Ford’s other “fish” include electric cars costing billions as well as low-powered driver-assistance technologies like the automaker’s hands-free. Bluecruise Highway Driving System.

‘Staffing’ and selling

GM was among the first automakers to announce and target billions of dollars in new electric vehicle investments Sales of internal combustion engine vehicles will end by 2035.

But Ford gives GM an easy sell on EVs, while GM prioritizes luxury models with its new battery technology, including $100,000-plus Hummers And the Bolt EV with older battery technology.

“As with AVs, GM jumped ahead of it,” says Abulsamid. “But if you look, for example, outside of the auto industry, in the technology industry, there’s no guarantee that you’ll be successful in being first to market in the long term.”

Ford sold 41,236 all-electric models in the first nine months of this year, while GM sold 22,830 — mostly its older Bolt models.

Ford has benefited from an EV strategy that has allowed it to ramp up production faster than GM and get more vehicles on dealer lots. The company has taken popular vehicles with traditional gas engines and “stuffed” battery packs into them to convert them into electric vehicles.

GM, in contrast, has developed a dedicated EV architecture. Ford plans to eventually follow suit, but its near-term approach has given it a head start on sales, and consumers aren’t seeming to mind. Ford continues to build hybrid and plug-in hybrid electric vehicles, something GM has decided not to do Other than a possible “electrified” Corvette.

GM is the only automaker besides the industry-leader Tesla The company, which produces its own battery cells through a joint venture in the US, has announced plans for four joint venture battery plants in the US, including one in Ohio that began commercial production of the cells earlier this year.

Ford has similar plans, committing $5.8 billion to build twin lithium-ion battery plants in central Kentucky through a joint venture with South Korea-based SK, but production is not expected to begin until 2026.

Edward Jones’ Windau said that while GM may be ahead of Ford in the short term, others could catch up in the years ahead.

“Being able to move a little faster is an advantage,” he said. “It looks like a lot of players are following the same approach again.”

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