Ford versus GM: which automaker offers a better upside potential?

2019 has been a difficult year for Ford Motor Company (NYSE 🙂 and General Motors Company (NYSE :). Both car manufacturers are confronted with a deep fall in demand in their home market and in China, where economic misery and stricter emission regulations are damaging sales.

To face this challenging business environment, both companies have announced a major restructuring to revive sales and prevent their stock prices from weakening. Let's take a closer look at where these automakers are.

Ford – Demand for prospects remains weak

The second largest automaker in the world is facing strong headwinds this year. Ford lost $ 155 million before interest and taxes in China in the second quarter, with deliveries to dealers falling 32%, while the company struggles with an aging product line in one of the most important markets for its cars.

In North America, where Ford makes a lot of its profits, shipments for its Explorer SUV model fell in the second quarter, reducing revenues and margins. Struggling activities in Asia and Europe have prompted Ford to lower its forecast for 2019, indicating that the path to profitability will be bumpy for the automaker.

Ford is in the midst of a $ 11 billion restructuring plan spread over five years, including the scrapping of thousands of jobs, rejuvenating the line of SUV's and pickups, and leaving slow-selling sedans .

The company is introducing new versions of its popular Explorer and Escape SUVs this year, and it is planning to relaunch its Bronco off-roader in 2020. Ford has also signed a deal with Volkswagen (DE 🙂 to jointly develop electric and self-driving cars.

While Ford is carrying out this massive restructuring to improve profitability and prepare you for an era when electric and driverless cars will prevail, the stock shows some signs of life. It has risen by around 23% since the low in December, to close at $ 9.34 yesterday.

Even with this rebound, the Ford share continues to fall by more than 40% in the last 12 months and has traded less than $ 10 per share for most of this year amid concerns about the sustainability of the generous quarterly dividend of $ 0.15 per share

GM – Benefiting from local strength

Like Ford, GM is also confronted with declining demand in its most important regions. But the latest version of the company shows significant progress in implementing the turnaround plan, and GM has already started to reap the benefits.

For the second quarter, GM easily outperformed analysts' average earnings estimates and maintained its outlook for a stronger second half. Chief Executive Officer Mary Barra continues to expect an almost record profit for 2019 when renewed heavy-duty pickups enter the showrooms.

"Our results show the profitability of our full-size truck franchise, with even more benefits," Barra said in a statement. According to a report in Bloomberg, the Beefier versions of the Chevrolet Silverado and GMC Sierra pickups help GM in a big way.

Each truck sold for about $ 15,500 in the quarter, about $ 8,400 more than the average transaction price for all company vehicles in the US "Because the models are among the best-selling items in the industry, they are enormously profitable, " called.

Cost savings, including the closure of five factories in North America this year, are expected to increase profits by 2019 by as much as $ 2.5 billion. And according to Chief Financial Officer Dhivya Suryadevara, the range of restructuring movements that GM has planned will increase revenues by 2020 by a total of $ 6 billion.

These bullish estimates propel GM stocks in 2019. Yesterday, ending at $ 38.73, they won 16% this year.

However, GM's performance in China is not much better than that of Ford. The company said last month that its auto revenues from operations there fell 60% to $ 235 million, and the automaker expects the industry to remain weak during the second half of the year.

Bottom Line

GM & # 39; s local strength and the successful implementation of its restructuring plan is a clear distinguishing factor when comparing the two US-based automakers. In the long run, GM has also proved to be a better bet than Ford – in the last five years, GM has won 18%, while Ford has lost more than 40%. At a time when the future is becoming uncertain for traditional car manufacturers, it is better to keep a trusted name – and GM is certainly on a stronger basis.

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