Same industry, two very different companies | Daily News Byte

DETROIT — “Same industry. Two different companies.”

That’s how influential Morgan Stanley auto industry analyst Adam Jonas recently described it General Motors and Ford Motor — bitter rivals for more than a century.

The two constantly attempted to outdo each other in sales, performance and styling of new cars. GM has gained an advantage in recent years on the back of better finances and an early move to electric and autonomous vehicles. GM most recently reported third quarter results that, compared to Ford, knocked it out of the park.

The investment cases for America’s biggest automakers are increasingly divergent as the companies — separated by just $1 billion in market value — have taken different tacks around electric and autonomous vehicle.

GM is diversifying as much as possible around the burgeoning battery and self-driving car businesses alongside a plan to offer exclusively electric vehicles by 2035. Ford will move also in EVs, but keeps investing in its traditional businesses at the same time. Ford expects at least 40% of its global sales to be electric vehicles by the end of this decade.

(Both companies continue to rely heavily on traditional sales of high-margin pickups and SUVs in the meantime, renewing their focus on the segment and leveraging billions of dollars in revenue to pad investments in both autonomous and electric vehicles.)

Wall Street analysts say they are watching emerging segments for when, or if, one of Detroit’s automakers might distinguish itself.

“It’s a very competitive industry, and they all tend to be pretty fast followers from that point of view,” said Edward Jones analyst Jeff Windau. “It becomes difficult to really differentiate for a long time.”

Ford is undergoing extensive 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 running in a higher gear with a big difference in margins between the two companies right now,” Morningstar analyst David Whiston told CNBC. “GM went through a lot of that pain years ago.”

GM has been quick to note its differences from Ford, and is likely to do so again Thursday during an investor event. But the message never seemed to catch on.

Wall Street maintained an average “overweight” rating on both stocks, according to analyst reports compiled by FactSet. Both automakers are down more than 30% this year amid investor concerns that their earnings during the coronavirus pandemic are behind them due to rising interest rates, inflation and recessionary fears. .

Both stocks have a market cap of about $54 billion — though GM trades at about $40 a share and Ford trades closer to $14 a share — and seem to trade with each other .

Last month, Ford announced it was spinning off its Argo AI autonomous vehicle unit saying it had no confidence in the business or its potential for monetization in the foreseeable future.

“It’s become very clear that profitable, fully autonomous vehicles at scale are still a long way off,” John Lawler, Ford’s chief financial officer, told reporters on October 26. “We’ve also decided that we don’t need to create that technology to ourselves.”

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

“We’re seeing an increased separation between companies that are running commercial driverless services and those that are still stuck in the trough of failure,” Vogt said, roughly describing Ford’s announcement that it would dissolve Argo. “What happens here is that the companies with the best products move forward and accelerate.”

Cruise recently said it is expanding its robotaxi service to cover most of San Francisco. It comes months after the company commercially launched its fleet of self-driving cars for limited hours at night.

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

Ford’s other “fish” include billions spent on electric vehicles as well as low-capacity driver-assistance technologies like the automaker’s hands-free BlueCruise highway driving system.

GM is among the first automakers to announce billions of dollars in new electric vehicle investments and set a target to end sales of internal combustion engine vehicles by 2035.

But Ford has been GM’s easy sell on EVs, as GM prioritizes expensive models with its new battery technologies, including $100,000-plus Hummers and Bolt EVs with older battery technology.

“As with AVs, GM jumped in earlier,” said Abuelsamid. “But if you look, for example, beyond the auto industry, to the technology industry, being first in the market for a long time is not necessarily a guarantee that you will be successful.”

Ford sold 41,236 all-electric models in the first nine months of this year, while GM sold 22,830 — most of them older Bolt models.

Ford has benefited from an EV strategy that allows it to accelerate production faster than GM and get more vehicles on dealer lots. The company has taken popular vehicles with traditional gas engines and turned them into electric vehicles by “putting” battery packs into them.

GM, by contrast, has developed a dedicated EV architecture. Ford plans to follow suit eventually, but its close approach has given it a head start on sales, and consumers don’t seem to mind. Ford also continues to develop hybrid and plug-in hybrid electric vehicles, which GM has decided not to do except for a potential “electrified” Corvette.

GM is the only automaker apart from the industry leader Tesla making its own battery cells through a joint venture in the US The company has announced plans for four joint venture battery plants in the US, including one in Ohio that has begun commercial production of cells earlier this year.

Ford has similar plans, committing $5.8 billion to build twin lithium-ion battery plants in central Kentucky through a joint venture with South Korea-based SK, but production is not expected. starts until 2026.

Edward Jones’ Windau said that although GM may be ahead of Ford in the short term, others may catch up in the coming years.

“The ability to move forward faster is an advantage,” he said. “It seems that many of the players are, again, following a similar strategy.”