Morgan Stanley has cut earnings estimates for General Motors and Ford, based on lower expectations for production and higher interest rates impacting credit company earnings, according to Forbes magazine.

Morgan Stanley reportedly said: “The key for profits going forward is whether the consumer will respond to increased incentives and/or whether higher incentives on light trucks will continue to aid industry mix.” Consumer response to incentives “could aid the volume picture although the profit picture would continue to be pressured,” Morgan Stanley added.

Forbes said the research firm cut the 2004 earnings estimate for General Motors to $US6.10 per share from $6.60 and cut the 2005 estimate to $7.05 from $8.35. Morgan Stanley also cut its 2004 earnings estimate for Ford to $1.20 per share from $1.25 and lowered the 2005 estimate to $1.30 from $1.50.

General Motors is more exposed to higher rates than Ford, due to GM’s large mortgage business, Morgan Stanley said, according to Forbes.