Shares of Ford have continued to plunge today following yesterday’s gloomy earnings guidance, and are now down 8% this week.Toyota Motor (TM) has declined just 0.6% this week, while General Motors (GM) has ticked up 0.3% and Honda Motor (HMC) has advanced 1.1%.
Don’t expect them to continue to stay afloat, as Morgan Stanley’s Adam Jonas and team warn that the causes of Ford’s disappointment are industry-wide. They write:
The biggest source of disappointment was Ford’s guide on their N. American volume which is expected to decline despite a market up 5%, $3 gas, cheap money and easy credit. This should send a chill to OEM competitors, suppliers and dealers alike. The auto cycle may be in even later innings than we realize.
We think the culprit is pricing/competition – not just from the Japanese – but from everybody. The market is clearly moving from a ‘need to replace’ to a ‘can’t afford to pass up a great deal’ consumer mindset. Competition in the small to mid-size super-segment is particularly high. Ford takes the admirable, but painful, decision to sacrifice volume. The sources of the warning are mostly NOT Ford specific. We see a material read-across to peers. [General Motors] may want to send Ford a Christmas card for getting investor expectations to include some of the market pressures outside of its control. Ford may make more money in small cars, but [General Motors] swims in the same waters.
And that seems to have been the conclusion in the market today, as the major automakers see their stock prices decline. Shares of Ford have dropped 2.4% to $15.27 at 1:50 p.m., General Motors has fallen 2.8% to $40.13, Toyota Motor has declined 2.1% to $118.54 and Honda Motor is off 1.6% at $40.78.
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