Ford vs. GM: Same Industry, Two Increasingly Different Companies

Jim Farley, CEO of Ford, left, and Mary Barra, CEO of General Motors

Reuters. General motors

Detroit – “Same industry. Two different companies.”

This was recently described by Morgan Stanley auto industry analyst Adam Jonas General motors And the Ford Motor Performance opponents for more than a century.

The two constantly tried to outdo each other in sales, performance, and design of new vehicles. General Motors has gained an advantage in recent years on the back of an improving financial situation and early moves into electric and self-driving cars. General Motors recently reported third-quarter results that took it out of the park, compared to Ford.

The investment cases of America’s largest automakers are increasingly diverging as the companies — just $1 billion between them in market capitalization — have taken different actions around electric and self-driving cars.

General Motors has diversified as much as possible around its emerging battery and autonomous vehicle business along with a plan to offer exclusively electric vehicles by 2035. Ford is also moving into electric vehicles, but continues investments in its traditional business at the same time. Ford expects at least 40% of its global sales to be electric vehicles by the end of this decade.

(Both companies continue to rely heavily on traditional sales of high-margin trucks and SUVs in the meantime, renewing their focus on the sector and leveraging billions of dollars in profits to mobilize investments in both autonomous and electric vehicles.)

Wall Street analysts say they are watching booming sectors to see when or if a Detroit automaker can differentiate itself.

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

Ford is undergoing an extensive restructuring as part of CEO Jim Farley’s transformation plan, called Ford+. Meanwhile, GM cut costs years ago under CEO Mary Barra.

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

GM is quick to note its differences from Ford, and will likely do so again Thursday during an investor event. But the message does not seem to take hold.

Wall Street maintains an average rating of “overweight” on both stocks, according to analyst reports compiled by FactSet. Both automakers have fallen more than 30% this year as investors fear that their peak earnings during the coronavirus pandemic are behind them in light of rising interest rates, inflation and recession fears.

Both stocks carry a market capitalization of about $54 billion – although General Motors is trading around $40 a share and Ford is trading at nearly $14 a share – and they seem to trade side by side.

independent investments

Late last month, Ford announced it was disbanding its Argo AI autonomous vehicle unit, saying it had no confidence in the business or its monetization potential for the foreseeable future.

“It has become very clear that profitable, self-driving vehicles on a large scale are still a long way off,” John Lawler, Ford’s chief financial officer, told reporters October 26. We make this technology ourselves.”

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

The day before, GM Cruise CEO Kyle Vogt provided upbeat comments about the growth of his company’s robotaxi business, including a “rapid expansion phase” with “meaningful revenue” starting next year.

“We’re seeing a growing disconnect between the company’s driverless commercial services and those that are still stuck in a trough of disappointment,” Vogt said, practically foreshadowing Ford’s announcement that it would disband Argo. “What’s happening here is that the companies with the best products are getting ahead and accelerating.”

Cruz recently said it’s expanding its bot service to most of San Francisco. This came months after the company commercially launched a fleet of self-driving vehicles during limited hours at night.

“It’s clear that GM is looking at this as a long-term opportunity that they want to be a part of,” said Sam Abu Al Samed, principal analyst at Guidehouse Insights. Ford says, ‘We think they’ll get there eventually, but it’s going to take longer, and we’ve got other fish to pick up now.

Other “fishes” for Ford include the billions spent on electric vehicles as well as lower-capacity driver assistance technologies such as the hands-free BlueCruise highway driving system.

“Stuffing” and sell

General Motors was among the first automakers to announce billions of dollars in investment in new electric vehicles and set a goal to end sales of internal combustion engine vehicles by 2035.

But Ford was the company that easily beats General Motors for electric vehicles, while GM prioritizes luxury models with its new battery technology, including Hummers and Bolt EVs worth over $100,000 with older battery technology.

“As with self-driving vehicles, GM jumped earlier,” said Abu Al-Sumaid. “But if you look, say, beyond the auto industry, to the technology industry, being the first to market in the long run, there is not necessarily a guarantee that you will succeed.”

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

Ford’s benefited from an EV strategy that allowed it to ramp up production faster than GM and get more cars at more dealerships. The company has taken popular vehicles with traditional gas engines and turned them into electric cars by “stuffing” their battery packs.

In contrast, General Motors built a custom EV architecture. Ford plans to eventually follow suit, but its near-term approach has given it a head start on sales, and consumers don’t seem to mind. Ford also continues to produce hybrid cars and plug-in hybrid electric vehicles, which GM has decided not to do other than a potentially “electrified” Corvette.

General Motors is the only automaker besides being an industry leader Tesla Production of its own battery cells through a joint venture in the United States. The company has announced plans for four joint battery factories in the United States, including one in Ohio that began commercial production of cells earlier this year.

Ford has similar plans, setting aside $5.8 billion to build dual lithium-ion battery plants in central Kentucky through a joint venture with South Korea-based SK, but production isn’t expected to start until 2026.

And while GM may be ahead of Ford in the short term, others may catch up in the coming years, Edward Jones’ Windo said.

“Being able to go a little faster is an advantage,” he said. “It appears that a lot of players are, again, taking a similar approach.”

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