Despite a steep sell-off in speculative electric vehicle stocks, gas-powered automakers are holding up. General Motors (GM) and Ford (F) are both up by 8.6% and 9.31% YTD. Markets are not discounting those stocks to price in the risks of lower demand, excess supply, and higher auto loan delinquencies.
GM and Ford are getting ahead of the weaker demand by cutting costs. GM sent a memo to employees to offer a voluntary buyout of white-collar workers. It will take a massive $1.5 billion charge for this Voluntary Separation Program.
GM is harming its long-term prospects. It is taking out experienced engineers with over five years of experience. It will replace them with less expensive, inexpensive staff.
Ford seeks to cut over 1,000 jobs at its European plant. Cost reduction is necessary for the face of a global auto industry supply glut. Ford is reportedly offering discounts for its Mach-E EV SUV to China customers until the end of next month. It paused production of its F-150 Lightning due to battery fire risks.
Ford has a demand problem and faces higher operating costs from recalls. Investors should expect pressure on profits, hurting F stock this year.
Neither GM nor Ford stock are attractive. Markets may assign a lower worth to their shares.
