For Ford Motor Company (F) and General Motors Company (GM), Trade Trumps Trump

GM and Ford cannot afford a trade war

The initial reaction to the election of Donald Trump was to buy, buy, buy the automakers.

Shares in Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) jumped after the results since Trump says he wants an industrial policy that will benefit heavy machinery and car sales.

But the bulls may be making a mistake. A trade war would be very, very bad for the automakers.

Even with the recent bull run, both stocks are bargains. Ford sells at a price-to-earnings multiple of 6.6, against an S&P 500 average of 18. That of GM is even lower — it’s below 3.9. Buy the stock today and your earnings could equal the price you pay before the next presidential election.

Ford Stock Is a Multinational

Ford is less an American auto company than a multinational that happens to be based in America. It makes its design and production decisions based on where it can get a competitive advantage.

Ford, which has already invested $2 billion in India, is now building a technology center there that will employ 12,000 people. Its new EcoSport SUV will be made in India and imported to the U.S. market.

Ford’s factory in Brazil is producing cars around-the-clock while it is idling four U.S. plants while sales catch up to production of its F-150 truck. The new Ford Bronco is going to be developed in Australia. It is still moving small car production to Mexico, despite Trump’s threats to scrap the North American Free Trade Agreement (NAFTA), though they did decide not to move Lincoln MKC production.

These are the kinds of moves that let Ford beat earnings expectations for its third quarter, earning 26 cents per share while analysts had been expecting 21. Revenue came in at $35.9 billion. To put it in perspective, that’s over five times more than, Inc. (NYSE:CRM) brought in all of last year.

CEO Mark Fields says the company is rushing headlong into a future where it will no longer be a car company, but a “mobility” company. It is using Blackberry Ltd (NASDAQ:BBRY) in its cars and could easily buy the company, which is worth $4 billion, even while Apple Inc. (NASDAQ:AAPL) could probably buy Ford itself with seat-cushion money, given its over $200 billion in cash against Ford’s market cap of under $48 billion.

Ford’s future, in short, is not going to wait on Donald Trump.

GM Moving Even Faster

General Motors is moving even more rapidly into the future.

Its big new U.S. car is a small electric called the Chevrolet Bolt. It is importing its new Cadillac luxury hybrid, the CT-6, from China and says the Cadillac unit will lead it into the “self-driving revolution.”

GM invested $500 million in Lyft, a ride-hailing service, and then signed a car-sharing deal with rival Uber. Uber drivers will be able to lease GM vehicles, just as Lyft drivers can. GM even has a deal with International Business Machines Corp. (NYSE:IBM) to put its Watson system into cars, enabling automated warnings of hazards and voice-based transactions.

As to U.S. workers, GM is laying off 2,000 of them in Lordstown, Ohio, and Lansing, Michigan. It is laying off another 160 at a components plant in Kokomo, Indiana.

These are the kinds of moves that have turned Morgan Stanley bullish on GM for the first time in years.

GM, like Ford, has only now dug out from under the last recession. It has operating cash flow of $15 billion in the last 12 months, it is bringing six cents of every dollar in sales to the net income line and it had sales of over $152 billion last year. It is modernizing its asset base and finding the loan windows open.

Politicians can say and do what they want. Business is business. Business is global. A trade war would be bad for GM and Ford. It would be worse for Donald J. Trump.

Dana Blankenhorn is a financial and technology journalist. His latest novel is Bridget O’Flynn vs. Something Big & Ugly. Write him at or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL.

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