Goldman Sachs has removed General Motors’ stock from its list of recommended shares to buy, while upgrading the stock of cross-town competitor Ford to “buy” from “neutral”, reports auto news site Motrolix.
In a research note issued Wednesday, the multinational investment bank wrote that Ford is “hitting its sweet spot” and believes that it will be the company that will deliver superior growth compared to GM, especially with the redesigned F-150.
The recommendation seems odd at first, since Ford shares have barely moved in 2015 despite an uptick in car sales. In addition, Ford shares have trailed those of GM over the past 16 months. However, Goldman Sachs lists two primary reasons for its newfound faith in The Blue Oval: trucks and China.
Nevertheless, Goldman lists two primary reasons for its newfound faith in The Blue Oval: trucks and China.
General Motors is one year ahead of Ford in redesigning its pickup trucks primarily sold in the United States. While The General has resolved most, if not all of the constraints related to the launch of the all-new Chevrolet Silverado and GMC Sierra, Ford’s all-new aluminum-bodied 2015 F-150 is just now hitting full-scale production. Given the competitive advantage brought on by its aluminum body, Goldman expects GM and Fiat Chrysler’s Ram to compete with the new F-150 with its steel-bodied trucks by offering steep discounts, thereby eating into its profits.
The once-burgeoning Chinese auto market and economy are showing signs of deceleration amid an economic slowdown. The scenario is especially noteworthy for GM, since it has more to lose from lower sales in China than does Ford, which relies much less on Chinese sales.
Wall Street Reacts
Wall Street didn’t wait long to react to Goldman’s recommendations: GM shares dipped nearly 2 percent on Wednesday, while Ford shares rose 2 percent.