Ford is currently lagging behind General Motors and could close the gap by following GM’s lead on buybacks, refining its electric vehicles and hybrids mix, and reducing warranty expenses. Despite Ford’s shares only rising 7% year to date compared to GM’s nearly 22% increase, there is potential for Ford to catch up by implementing similar strategies, especially in returning cash to shareholders through buybacks.
GM’s accelerated buyback program worth $10 billion led to a significant increase in its stock price, while Ford’s slower buyback rate resulted in a smaller uptick in share value. Ford has a strong capital return strategy, with dividends and stock repurchases, but allocating more funds to buybacks could potentially boost its stock price.
In addition, GM’s focus on electric vehicles and anticipating a mid-single-digit EV margin by 2025 has been a driving force behind its recent outperformance. Ford, on the other hand, has shifted focus towards offering hybrid options across its North American lineup by 2030, a move that has been well-received by analysts like Adam Jonas.
Warranty expenses have been a challenge for Ford, with increased costs associated with recalls and troubled vehicle launches impacting its financial performance. Despite these headwinds, Ford is working towards maintaining flat warranty costs for the full year 2024.
Overall, Ford has the opportunity to catch up with GM by implementing similar strategies in buybacks, refining its electric vehicles and hybrids mix, and managing warranty expenses effectively. If executed successfully, Ford has the potential to close the gap and see significant growth in its stock price.
Ford is currently trailing behind General Motors in terms of stock performance and capital returns. General Motors has been buying back a significant amount of stock, leading to a 22% increase in share price, while Ford has only seen a 7% gain. Ford has a strong dividend yield and a commitment to returning cash to shareholders, but lacks the aggressive buyback strategy that GM has implemented.
In addition to buybacks, Ford is also lagging behind in the development of electric vehicles (EVs) compared to GM. While both companies are losing money on their EV efforts, GM’s management has set a more aggressive EV margin target for 2025. Ford recently announced a shift towards offering more hybrid options in its lineup by 2030, recognizing the strong sales performance of hybrids.
Another challenge for Ford has been higher warranty expenses due to recalls and troubled vehicle launches. Ford recorded a significant increase in warranty costs in the third quarter, causing a quarterly miss. The company expects warranty costs to remain flat for the full year 2024. This has been a headwind for Ford, but it is working to address the issue and ensure quality standards in its vehicles.
Overall, Ford has the potential to close the gap with General Motors by focusing on buybacks, refining its mix of electric vehicles and hybrids, and reining in warranty expenses. By following GM’s lead on capital returns and EV development, Ford can potentially improve its stock performance and compete more effectively in the auto industry.
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