Saying that it believes that a lot of the bad things that Ford Motor Co. (NYSE: F) said in its recent profit warning also apply to the outlook for General Motors Co. (NYSE: GM), an analyst at Morgan Stanley on Tuesday cut its price target on GM stock from $29 to $27 a share and left unchanged an Underweight rating. GM stock has not reacted well, down about 3.5%. When Ford issued its warning late last month, its shares fell about twice that much.
In its press release, Ford said that pretax profits would total $6 billion and that North American profit margins are expected at around 8%, the lower end of its previous guidance range. The company blamed higher warranty costs, including North American recalls, and low volume in South America and Russia. Sales are expected to improve in Europe, but the region is still expected to post a loss for the year.
That statement could just as easily have come from GM. The company has recalled more than 26 million cars in the United States so far in 2014. Its European business has been so awful for so long that most observers wonder why GM doesn’t just close it down (easier said than done in Europe).
Car sales in Russia have been in the tank all year and will not improve any time soon. GM’s St. Petersburg plant is cutting production and offering buyouts to 500 of its 2,000 employees.
GM’s stock price dropped 3.7% to $32.50 in the late morning Tuesday, within a 52-week range of $31.67 to $41.85. The consensus estimate for GM share price from 16 analysts is about $42.30.
Top Gaining Stocks
Top Losing Stocks