Ford, GM Comparisons Back in Style

Ford vs. GM comparisons have long been popular. One analyst says Ford dominates, but others say GM will benefit from more new products in the years to come.
By Ted Reed ,

DETROIT (

TheStreet

) --

GM's

(GM) - Get Report

return to the public markets has enabled the return of a favorite Detroit sport, comparing

Ford

(F) - Get Report

and GM.

Obviously, Ford has had a spectacular run, with its stock up 64% this year after rising 334% in 2009. Shortly after midday Wednesday, shares traded at $16.67, down six cents.

In general, Ford's management team inspires confidence, while GM's record of having four CEOs in the past 20 months raises questions.

Since returning to the public markets on Nov. 18, GM shares have traded in a narrow window between $33 and $36. Shortly after midday Wednesday, they were trading at the high end, up 59 cents to $35.91.

The comparison between Ford and GM cash flow was a key factor for some of the four analysts who set price targets when they

initiated GM coverage on Tuesday. Additionally, a consistent theme in the reports was that while GM lags Ford in 2011 product introductions, it could move ahead in 2012 and 2013.

Last week, in a report entitled "Ford vs. GM: Who's the best in Detroit?" UBS analyst Colin Langan said the answer is Ford. Langan has a buy rating on Ford and a neutral on GM, which makes him a

GM contrarian in light of Tuesday's round of buy recommendations.

"We remain more bullish on Ford given our view that its stronger product launch schedule should allow the company to leverage the North American recovery better than GM near-term," Langan wrote. "While GM leads Ford in terms of regional market share and non-core asset valuations, these pieces are much smaller profit contributors relative to the 'core' North American businesses."

Langan compares the companies in eight areas: balance sheet, product mix, valuation, market share, incentives, EBIT margins, cost structure and emerging market exposure.

He said the two companies are similar in balance sheet (net liabilities total $20.6 billion for Ford, $20.4 billion for GM) and in product mix (Ford is 38% car production and 25% full-size pickup, while GM is 36% car and 24% full-size pickup).

Ford ranks first in five categories: valuation; market share (Ford has a 140 basis point YTD gain while GM has an 80 basis point loss); incentives (Ford has lost $995 since 2008, while GM has gained $110); EBIT margins (Ford's is 10% while GM is at 8.2%) and cost structure as a percent of sales (Ford is at 25.2% while GM is at 27.7%).

GM is first in just one category -- emerging market exposure -- with a 12.2% share vs. Ford's 4.2% share. "GM has leading market share in most regions of the world, even within North America," Langan wrote. "That said, Ford has significantly narrowed the gap since the downturn

and we expect Ford's better product launch schedule will drive share gains at GM's expense."

-- Written by Ted Reed in Charlotte, N.C.

>to contact the writer of this article, click here:

Ted Reed

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