UBS Global Research analyst Joseph Spak downgraded Ford Motor Company (NYSE:F) to Neutral from Buy, maintaining the price target at $12.
The analyst sees limited upside to estimates for Ford over 2024 and 2025 than prior, highlighting that there is potential for more earnings upside at U.S. peer General Motors Company (NYSE:GM).
Ford’s Gen 2 EVs (clean-sheet approach) won’t launch until 2025/26, the analyst notes.
However, GM has a head start on its clean-sheet Ultium platform. While GM’s Ultium has had challenges, there have also been learnings, the analyst adds.
Given that many EV launches across the industry have issues, it’s not certain that F’s Gen 2 product won’t face the fate others have experienced, the analyst cautions.
Although the analyst applauded CEO Farley’s vision and direction for the future of Ford, per Spak, it could take a number of years for the benefits of those plans to be realized.
Ford indicated that, vs. their base plan, the new UAW labor contract was significantly higher (~2x) than they expected.
Ford is looking to tackle that headwind and take cost out, but according to the analyst, the surprise vs. base plan means identifying some savings initiatives may only be getting started, and cost out could take time to realize.
These apart, the analyst sees labor being a $1.5 billion- $2 billion headwind, pricing a ~$1.5 billion headwind in Blue. Lost strike volume could add $1.7 billion.
According to the analyst, Ford could announce a special dividend as they have indicated this is their preferred method to return excess cash (vs. GM share repurchases.