Ford and GM juggle today’s challenges with tomorrow’s promises

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DETROIT, Jan 28 (Reuters) – General Motors Co (GM.N) and Ford Motor Co (FN) are expected to report next week that they posted strong profits for the final quarter of 2021, but past performance rarely has less counted for investors.

The two Detroit automakers are midway between a combustion-fueled present and a future they promised will be defined by electric vehicles and software-powered services.

The two companies have planned multibillion-dollar investments in new North American electric vehicle and battery factories, aiming to challenge Tesla Inc and a group of small electric vehicle startups in the still-tiny market. . But these new factories won’t be running at full capacity until the middle of this decade.

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Although GM and Ford were once giants of the global auto sector, their market capitalizations have been eclipsed by electric vehicle maker Tesla. Tesla on Wednesday announced higher-than-expected revenue and profits for the fourth quarter of 2021, but warned that supply chain bottlenecks would continue through 2022 and likely prevent its factories from operating at full capacity. capacity.

Last year, GM sold fewer vehicles in the United States than Toyota Motor Corp (7203.T), the first time in 91 years that GM was not the top-selling automaker in its home market.

GM and Ford’s profits in 2021 have been boosted by consumers willing to pay record prices for gas-powered pickup trucks and SUVs. In 2022, analysts fear Detroit manufacturers will face a more uncertain economic environment, including rising interest rates, high oil prices and persistent supply chain bottlenecks that could reduce production.

Analysts expect both companies to be cautious in their outlook for 2022. Semiconductor shortages are expected to weigh on production in the second half, Bank of America wrote in a note.

“While automakers will benefit from a resumption of production and inventory replenishment, (these) could be associated with lower prices, a deterioration in the mix, an increase in input costs” , said Morgan Stanley.

Ford told investors in its third-quarter report that it expects raw material costs to rise by $1.5 billion and has seen inflationary pressures across a wide range of expenses.

Wall Street has shown more confidence in recent months in Ford CEO Jim Farley’s efforts to accelerate the company’s electric pickup and van programs. Ford’s market value hit $100 billion in mid-January, surpassing GM’s value for the first time in more than five years. But the market value of Ford, whose quarterly results are due Thursday afternoon, has since fallen 20% after the company released a complicated overhaul of its 2021 earnings forecast.

GM chief executive Mary Barra should have a simpler story to tell on Tuesday about fourth-quarter and full-year results. GM Chief Financial Officer Paul Jacobson told investors in December that the company expects 2021 adjusted pretax profit to reach $14 billion, higher than previously forecast.

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Reporting by Paul Lienert and Joseph White in Detroit Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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