Ford versus GM: same industry, two increasingly different companies

DETROIT – “Same industry. Two different companies.”

This is how Morgan Stanley’s influential auto industry analyst Adam Jonas recently described General Motors and Ford engine — fierce rivals for more than a century.

The two constantly tried to outdo each other in terms of new vehicle sales, performance and styling. GM has forged ahead in recent years thanks to better finances and its first steps towards electric and autonomous vehicles. GM recently announced third-quarter results that, relative to Ford, knocked it out of the park.

Investment cases for the biggest U.S. automakers are increasingly diverging as the companies — separated by just $1 billion in market value — have taken different approaches to electric and self-driving vehicles.

GM has diversified as much as possible around its emerging battery and autonomous vehicle businesses, alongside a plan to offer exclusively electric vehicles by 2035. Ford is also getting into electric vehicles, but at the same time maintaining its investments in its traditional activities. Ford expects at least 40% of its global sales to be electric vehicles by the end of this decade.

(Meanwhile, both companies continue to rely heavily on traditional high-margin pickup truck and SUV sales, renewing their focus on the segment and mobilizing billions of dollars in profits to increase investment in autonomous and electric vehicles. .)

Wall Street analysts say they are watching booming segments to find out when, or if, one of Detroit’s automakers may stand out.

“It’s a very competitive industry, and they all tend to follow pretty quickly in that regard,” Edward Jones analyst Jeff Windau said. “It becomes difficult to really differentiate yourself over a long period of time.”

Ford is undergoing a major restructuring as part of CEO Jim Farley’s turnaround plan, called Ford+. Meanwhile, GM cut costs years ago under CEO Mary Barra.

“GM is definitely operating at a higher gear with the major difference in margins between the two companies right now,” Morningstar analyst David Whiston told CNBC. “GM went through a lot of that pain a few years ago.”

GM isn’t shy about noting its differences with Ford and is expected to do so again Thursday at an investor event. But the message never seems to get through.

Wall Street maintains an average “overweight” rating on both stocks, according to analyst reports compiled by FactSet. The two automakers have lost more than 30% this year as investors fear their golden days of profits during the coronavirus pandemic are behind them in light of rising interest rates, inflation and fears of recession.

The two stocks have a market capitalization of around $54 billion – although GM trades at around $40 per share and Ford at nearly $14 per share – and apparently trade side by side.

Late last month, Ford announced it was disbanding its autonomous vehicle unit Argo AI, saying it had no confidence in the company or its monetization potential for the foreseeable future.

“It’s become very clear that cost-effective, fully autonomous vehicles at scale are still a long way off,” John Lawler, Ford’s chief financial officer, told reporters Oct. 26. “We also concluded that we don’t necessarily have to create this technology ourselves.”

A day earlier, GM Cruise CEO Kyle Vogt made upbeat comments about the growth of his company’s robotaxi business, including a “rapid scaling phase” with “meaningful revenue” from next year.

“We’re seeing an increased separation between the company’s commercial driverless services and those still stuck in the trough of disillusionment,” Vogt said, practically foreshadowing Ford’s announcement of Argo’s breakup. “What’s happening here is that the companies with the best product have gotten ahead and are accelerating.”

Cruise recently said he was expanding his robotaxi service to cover most of San Francisco. This came months after the company commercially launched its fleet of self-driving vehicles for limited hours at night.

“GM clearly sees this as a longer-term opportunity that they want to be part of,” said Sam Abuelsamid, principal analyst at Guidehouse Insights. “Ford says, ‘We think they’ll get there eventually, but it’s going to take a lot longer, and we have other fish to fry right now. “”

Ford’s other “fish” include billions spent on electric vehicles as well as less capable driver-assist technologies such as the automaker’s BlueCruise highway hands-free driving system.

GM was among the first automakers to announce billions of dollars of investment in new electric vehicles and has set a goal of ending sales of internal combustion engine vehicles by 2035.

But Ford was the one to easily overtake GM when it came to electric vehicles, while GM is prioritizing luxury models with its new battery technologies, including Hummers and Bolt EVs over $100,000 with tech. older battery.

“As with AV, GM stepped in earlier,” Abuelsamid said. “But if you look, for example, beyond the auto industry, into the tech industry, to be first to market in the long term, there’s not necessarily a guarantee that you’ll be successful.”

Ford sold 41,236 all-electric models in the first nine months of this year, while GM sold 22,830, the majority of which were its older Bolt models.

Ford benefited from an EV strategy that allowed it to ramp up production faster than GM and get more vehicles onto dealer lots. The company has taken popular vehicles with traditional gasoline engines and converted them into electric vehicles by “stuffing” batteries into them.

GM, on the other hand, has built a dedicated EV architecture. Ford plans to follow suit eventually, but its short-term approach has given it a head start in sales, and consumers don’t seem to care. Ford also continues to produce hybrids and plug-in hybrid electric vehicles, which GM has decided not to do other than a potential “electrified” Corvette.

GM is the only automaker besides the industry leader You’re here producing its own battery cells through a joint venture in the United States The company has announced plans for four joint venture battery factories in the United States, including one in Ohio that began commercial production of the cells earlier this year.

Ford has similar plans, allocating $5.8 billion to build two lithium-ion battery plants in central Kentucky through a joint venture with South Korea-based SK, but production is only expected. not start before 2026.

Edward Jones’ Windau said while GM may be ahead of Ford in the near term, others could catch up in the coming years.

“Being able to move a little faster is an advantage,” he said. “It seems like a lot of players are following, again, a similar approach.”