Zhi Tong Cai Jing·2025-10-17 14:11Core Viewpoint - Both Ford and General Motors are expected to report strong third-quarter results, but concerns about tariffs, supply chain issues, and electric vehicle demand may significantly impact profitability in the fourth quarter and beyond [1][2][3] Group 1: Third Quarter Performance - Ford and General Motors reported retail sales growth of 8.2% and 7.7% year-over-year, respectively, outperforming the industry average growth of 5.2% [1] - The average transaction price (ATP) for Ford increased by 1.7% year-over-year, while General Motors saw a 4.8% increase, with GM's incentive spending as a percentage of vehicle price at 6.1%, below the industry average, indicating stronger pricing power [1] - Adjusted EBIT for General Motors in the third quarter is projected at $2.81 billion, exceeding market expectations by 3.5%, while Ford's EBIT is expected to be $2.11 billion, surpassing expectations by 3.9% [1] Group 2: Fourth Quarter and Future Risks - In the fourth quarter, General Motors faces risks from metal tariffs and potential 25% tariffs on medium/heavy trucks, which could reduce EBIT by $650 million in 2025 [2] - Ford is impacted by a fire at a key aluminum supplier's plant, leading to an expected production cut of 120,000 to 150,000 units for F-150/250 models, resulting in an estimated gross profit loss of $700 million [2] - Ford's fourth-quarter EBIT forecast has been significantly reduced from $1.79 billion to $1.33 billion, with EPS revised down from $0.30 to $0.21, falling short of market expectations [2] Group 3: Long-term Profitability Outlook - General Motors' 2026 EBIT forecast has been lowered from $13.4 billion to $11.8 billion due to a 3% decline in North American sales expectations [2] - Ford's 2026 EBIT forecast has been adjusted down from $9.7 billion to $8 billion, attributed to slower margin improvement in Ford Pro and continued losses in the Model e electric vehicle business [2] - Free cash flow for General Motors is projected at $7.9 billion in 2025, supporting ongoing buybacks and dividends, while Ford's free cash flow is expected to drop from $4 billion to $2.5 billion in 2026, potentially limiting future buyback capacity [2] Group 4: Valuation and Market Sentiment - Current valuations for General Motors and Ford reflect most negative expectations, with projected 2026 EV/EBITDA ratios of 2.8x and 2.6x, respectively, indicating some margin of safety [3] - Short-term stock price fluctuations will be influenced by tariff policies, supply chain recovery, and trends in the electric vehicle market [3]