Wall St labels Detroit 3 fiscals disappointing

THE second-quarter financial performance of America’s three largest automotive firms has been labelled by Wall Street as ‘disappointing’.

Facing costly EV plans while at the same time juggling demand for traditional motive power – and a steady wave of cheaper imports – has seen earnings from Ford and Stellantis post stock falls of 4.5 per cent and 48.0 per cent respectively, General Motors (GM) faring better with an uptick of 14 per cent.

However, Wall Street says full-year projections for all three are shaky, with analysts noting a range of concerns shared by Detroit 3 investors.

“Auto(motive) remains one of the more challenged industries in the world in terms of competition, excess capacity, (and) cyclical and secular risks,” said analytical firm Morgan Stanley in its most recent investor note.

“GM management deserves credit for improving a range of business factors within its control. It’s the long list of factors that remain outside the company’s control that move us into the ‘pit lane’ on the name at this time,” it said, downgrading its outlook for the company.

Analysts said reasons behind the concern included rising inventories, higher incentives, and vehicle affordability, noting that the market’s volatility is “discomforting”.

Ford’s second-quarter net income fell to $US1.8 billion ($A2.7b), a mark CFRA Research analyst Garrett Nelson said was “disappointing” noting that investors are losing patience with Ford’s multipronged approach toward a greener fleet.

Stellantis is also working through a tough period, with CEO Carlos Tavares squarely attributing many of the company’s issues to poor performance in the North American market.

Mr Tavares said Stellantis has not been building the right number nor types of vehicles to meet market demand, needs to better present its available incentives, and has been hurt by supply chain and quality issues.

GM raised its forecast for adjusted earnings before interest and taxes to between $US13 and $US15 billion ($A19.6 and $A22.6b), but also lowered its net income forecast to between $US10 and $US11.4 billion ($A15.1 and $A17.2b).

Executives for the company say pricing has been stable while incentives remain low, the company also predicting headwinds in the second half of the year that includes its struggling Chinese business, higher commodity prices, and slightly lower vehicle pricing.

“We believe that GM’s new guidance remains conservative even with some incremental headwinds (among them) higher volume of lower-profit EVs,” said an analyst for BOFA Securities.

GM is also delaying production of electric pick-ups by up to six months (to mid-2026) and postponing the launch of Buick’s first battery electric vehicle.

“It appears the room for caution in GM’s guide is partially related to risks in the EV market (overall) as well as making room for potential competitive pricing actions that can have an impact on GM’s business,” said Morgan Stanley’s analysts.

“Risks around broader EV market fundamentals impact GM given both the scale, vertical integration, and quantum of capital it has allocated to the EV market over the past five years.”

With Automotive News