Citigroup's Battle Of The Giants: General Motors Versus Ford

Itay Michaeli of Citigroup believes that if gas prices continue to fall to at least $2.50 per gallon,

may be better positioned than

Michaeli adds that the distinction between the two auto makers could become “critical” if the Yen continues to weaken. General Motors holds a capacity advantage in production of large vehicles that benefit from lower gas prices like SUVs and trucks, according to Michaeli. The analyst explains that Ford's capacity is constrained in its Chicago plant while General Motors has excess rooms. In addition, General Motors has additional capacity for Midsize Pickups at its plant in Wentzfille while Ford has offering. Finally, Ford will be constrained for a few months due to the ramp up of its new F-150 truck, according to Michaeli. Michaeli further notes that General Motors no longer deserves to trade at a discount to Ford. However, the analyst chooses not to value General Motors at a premium to Ford at this time given General Motors' legal cost overhang from recalls. Shares of Ford were maintained with a Buy rating with a price target lowered to $17 from a previous $18. Shares of General Motors were maintained with a Buy rating with a price target unchanged at $48.