Ford & GM Feeling Europe's Economic Despair
No stranger to dealing with catastrophic economy woes, Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) must rev up for potentially disappointing revenues headed their way – except this time around, it's a foreign sector that will be dishing out poor results for the companies.
Europe has been experiencing much of what the U.S. went through in recent times when it came to monetary hardships, and just like Europe undoubtedly felt partial backlash from America's economic disaster, American companies are now feeling the adverse effects of international fiscal blunders.
Unfortunately, those that cannot afford to take a hit are doing just that. According to Thomson Reuters, F will likely lose between $500 million and $600 million in Europe alone this year. The company came to this realization when refurbishing its internal five-year plan.
Following this news, GM is striving to bump its sales volumes elsewhere this year in an effort to offset the devastation the automaker is feeling from Europe's trying times. Specifically, GM will work to ramp up sales in China several times over.
The issues currently plaguing auto customers overseas do not end with the purchase of motor vehicles. Europeans are replacing fewer car parts as well, as they try to tighten their belts in uncertain times. As the debts of countries such as Greece and Spain continue to deplete investor confidence in economic turnaround, customers of both F and GM will likely remain strapped for cash.
Experiencing challenging quarters as of late, both F and GM cannot afford to deal with anymore disappointment. According to Jefferies, May was not a particularily glamorous quarter for automakers in the U.S.
“May's U.S. light vehicle SAAR of 13.7mn missed consensus by 5% and was the first month below 14.0mn this year. That sales missed so widely is concerning given a handful of auto-centric tailwinds in May. Strong auto sales had previously been a key macro highlight. Unfortunately, May's results were befitting of Friday's weak jobs report and followed weaker Chicago PMI, China PMI, and int'l airfreight data, making it a "weak week" overall,” Jefferies said on Monday.
Challenging times are not dissipating anytime soon, or so it appears. However, there is light at the end of the seemingly endless tunnel. Morgan Stanley believes GM's management is on the right track in terms of execution and strategy, with small wins building up confidence and credibility.
F's fate is not yet doomed either. Despite a rocky month, May sales were still up 13% over this time last year.
As economic turmoil continues to fester worldwide, citizens of said countries are continuing to hold back in terms of spending. However, with strong management and increased sale efforts, it appears money issues won't be able to stand in the way of companies built Ford…or General Motors, tough.
GM closed yesterday at $21.85, up 7.79% year-to-date, while F closed yesterday at $10.55, down 1.95% year-to-date.
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Latest Ratings for F
|Sep 2014||Morgan Stanley||Downgrades||Overweight||Underweight|
|Aug 2014||Stifel Nicolaus||Upgrades||Hold||Buy|
|Aug 2014||Credit Suisse||Initiates Coverage on||Neutral|
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