Analysts don’t like Ford’s profit outlook or the prospects of both Ford and General Motors shares, according to US reports.
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According to the Forbes magazine website, Prudential Equity Group analyst Michael Bruynesteyn has lowered his earnings estimates for Ford, citing lowered expectations for Ford Credit.
The analyst report cut 2006 and 2007 earnings estimates to 27 cents and 78 cents, respectively, from 40 cents and 90 cents, in a report issued on Monday.
Forbes said Bruynesteyn cited three “key headwinds” for the business: rising provision for credit losses (after four years of decline), rising 2006 interest costs and peaking used vehicle prices.
The analyst said he remains cautious on Ford shares for the long-term due to “uncertain outlook for free cash flow, the high reliance on significant cost savings to achieve our earnings estimates, and the prospect for large market share losses in 2006 due to relatively weak product cadence” and maintained an “underweight” rating and US$7 price target on the stock, Forbes added.
Separately, according to Dow Jones (which also reported Bruynesteyn’s view of Ford), Citigroup analyst Jon Rogers reiterated his “sell” rating on both embattled automakers’ shares.
Rogers reportedly said he believes Ford and General Motors need more aggressive attrition plans to reduce fix hourly labour costs.
“Both automakers must shrink their production capacity, workforce, and liabilities to remain viable,” he said, according to Dow Jones. “All of these actions take time and lead to a smaller, lower operating leverage companies.”
He pegged the cost for idle hourly labour to rise to $4.7bn at GM and $2.3bn at Ford over the next two years, the report added.
“GM’s JOBS Bank and Ford’s GEN Pool provide full wages and benefits for workers displaced due to plant closings and capacity reductions, a significant impediment to both OEM’s structural cost savings plans,” he explained, according to the Dow Jones report.
