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Automaker Stock Showdown: Ford Vs. GM

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Despite the fact that most of the major car manufacturers have already posted third-quarter results, there’s still not a lot of clarity regarding who’s doing well, why they’re doing how they’re doing, and how well they’re apt to do in the future.

In other words, the auto industry’s outlook is a mess right now.

Good news for undecided investors, though: You can compare and contrast the two biggest publicly traded names in American automobiles — Ford (NYSE:F) and General Motors (NYSE:GM) — you just need the right framework to break them down into manageable pieces.

North America

If there’s a recession unfurling in the United States, somebody might want to tell carbuyers. Had it not been for Europe’s woes, Ford might have turned in its best Q3 ever thanks to strength from the North American market. Income of $1.63 billion would have been $2.1 billion had it not been for a $468 million loss stemming from its struggling European operation. Still, income of 40 cents per share topped expectations of 30 cents, and rolled in better than the year-ago figure of 34 cents.

General Motors performed well too, earning $1.48 billion thanks to — like Ford — surprising strength from the North American market. Also like Ford, GM could have produced a bottom line somewhere around $1.96 billion had it not been for the $478 million loss it took because of Europe’s plight.

Though stronger sales and profits from the U.S. market more than offset losses in Europe, GM’s North American profit still fell from $2.2 billion in the third quarter of last year to $1.8 billion this year. Ford, on the other hand, actually saw record profits from its North American operation.

Advantage: Ford.


While North American sales were encouraging — particularly for Ford — European woes for both major American car manufactures have been at distasteful levels (i.e. heavy losses) for six straight quarters now. Worse, there’s no real end in sight. The two companies aren’t necessarily in the same European boat, though.

Sadly, there’s no “winning” in Europe for the foreseeable future. There’s only “losing less than the other guy.”

To that end, Ford is well ahead of General Motors in cutting its European losses by closing as many facilities as possible. Ford announced it was pulling the plug on three more European facilities along with last quarter’s numbers, though it has been planning the contraction of its European business since early this year — a prudent (even if painful) move.

GM, on the flipside, is talking about shutting down some European facilities from one side of its mouth, yet talking about joint ventures with European manufacturers like Peugeot from the other.

So what? Though planned plant closures could cost Ford $1.1 billion, at least it will be done and the company can move on. General Motors might need to spend a similar amount to close some of its unprofitable plants in Europe, but has been hesitant to do so; for some reason, it’s feeling more than its fair share of political pressure. Still, one doesn’t get the sense that GM wants to scale back in Europe. That lost cause will simply bleed money until the company changes its mind.

Advantage: Ford.


The unexpected wrench in Q3’s numbers came from China, which inherently brings Toyota (NYSE:TM) and Honda (NYSE:HMC) into the equation.

Article printed from InvestorPlace Media,

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