Ford, GM, Stellantis face daunting second half of 2024 | Real Time Headlines

Detroit – Last Stock Ford Dropped more than 18% in one day they did last weekDuring the Great Recession, the U.S. auto industry was on the verge of bankruptcy.

Ford avoided bankruptcy in 2008-2009 and was far from any such disaster, but its stock price plummeted after the company missed the bankruptcy Wall Street profit expectations It’s a prime example of the uphill battle automakers face throughout 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 inventory 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.

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 Rising Incentives and delinquency).

Jonas’s comment is at Company downgrades General Motors’ rating It was revised to flat from overweight last week, adding, “Automotive remains one of the most challenging industries in the world in terms of competition, overcapacity, cyclical and longer-term risks.”

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.

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 to adjusted earnings per share of $8.3 billion, or $5.68, The entire first half.

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. General Motors is looking to increase production Loss-making electric carsas it aims to make vehicles profitable on a production or contribution 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 posted an equity loss of $104 million, marking the unit’s second straight quarter of losses following a loss in 2017. In 2023, it will reach its lowest point in about 20 years.

“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,” GM CEO Mary Barra expressed during tuesday 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, bolster its solid cash flow position and conduct billions of dollars in share buybacks to return capital to investors.

Several Wall Street analysts pointed out the differences in share buybacks between the two companies, citing Ford family voting control Board of Directors and Special Stocks.

“Given the increase in cash balances, there had been hopes for special dividends or even buybacks. In hindsight, this may have been just investor pressure compared to GM’s policies. However, Ford does not appear to be changing its stance.” UBS analysis analyst Joseph Sparks said in an investor note Thursday.

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.”

When interviewed by the media, Stellantis CEO Carlos Tavares He said many of the company’s problems stem from its U.S. operations, which he has previously said were affected by “arrogant mistakes” in vehicle inventory levels, manufacturing and sales strategies.

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.

Despite ongoing issues, Stellantis reiterated its 2024 guidance of achieving double-digit adjusted operating margin, positive industrial free cash flow and providing at least €7.7 billion to investors in the form of dividends and buybacks ($8.3 billion) in capital returns.

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.

Correction: Morgan Stanley downgraded GM to Equal Weight from Overweight last week. An earlier version misstated the time.