Ian Muttoo
In addition to providing negative predictions for the world economy, experts have been decreasing their target stock price and earnings estimates for the Detroit manufacturers during the past few weeks. According to analysts, problems like high energy costs, rising interest rates, inflation, convoluted production processes, and COVID infections all threaten profitability of the carmakers.
Nevertheless, other economists predict that the recession will be brief and that the market for automobiles will rebound more quickly than in the past. The key distinction is that this time, GM and Ford dealers in the United States do not have a sizable stock of unsold vehicles that they would need to clear out at a loss.
According to Bank of America analyst John Murphy, "we think the long-term prognosis is pretty good," citing low inventories and pent-up demand from buyers who held off when automobiles were in short supply or too expensive.
Comparing their balance sheets to the time prior to the 2008–2009 financial crisis, which resulted in GM's bankruptcy, both GM and Ford are in good shape.
GM, which will release financial results on Tuesday morning, reiterated its outlook for full-year profits while stating that it was unable to ship 95,000 vehicles in the second quarter due to component shortages. Earlier this month, GM stated that it anticipated Q2 net income of $1.6 billion to $1.9 billion, which was less than the $2.56 billion average prediction of the analysts surveyed by Refinitiv.
Ford reaffirmed its $11.5 to $12.5 billion operating profit target for the entire year.
source: reuters.com
Nevertheless, other economists predict that the recession will be brief and that the market for automobiles will rebound more quickly than in the past. The key distinction is that this time, GM and Ford dealers in the United States do not have a sizable stock of unsold vehicles that they would need to clear out at a loss.
According to Bank of America analyst John Murphy, "we think the long-term prognosis is pretty good," citing low inventories and pent-up demand from buyers who held off when automobiles were in short supply or too expensive.
Comparing their balance sheets to the time prior to the 2008–2009 financial crisis, which resulted in GM's bankruptcy, both GM and Ford are in good shape.
GM, which will release financial results on Tuesday morning, reiterated its outlook for full-year profits while stating that it was unable to ship 95,000 vehicles in the second quarter due to component shortages. Earlier this month, GM stated that it anticipated Q2 net income of $1.6 billion to $1.9 billion, which was less than the $2.56 billion average prediction of the analysts surveyed by Refinitiv.
Ford reaffirmed its $11.5 to $12.5 billion operating profit target for the entire year.
source: reuters.com
