Ford Motors (F) - Get Ford Motor Company Reportshares fell significantly against its larger competitor General Motors (GM) following suit, owing to Wells Fargo''s rare ''double downgrade'' on the United States automakers, citing cost and supply chain concerns that would derail their planned transition to electric vehicle production.
Colin Langan, a Wells Fargo analyst, reduced his price target on Ford by half, and reduced his rating two points to ''underweight'' from ''equal weight,'' pointing out that the carmaker needs to "double the supply chain to alleviate pricing concerns." This is because the manufacturer''s signature F-150 Lightning electric pick-up might be hampered.
Ford, for its part, said last month that increasing power and strong demand, especially for its just-launched F-150 Lightning, would reduce supply constraints and the effects of Russia''s war on Ukraine as it remained to its full-year operating earnings projection of $11.5 billion to $12.5 billion.
CEO Jim Farley said the carmaker''s "major focus is accelerating a more substantial shift in supply chain management," adding that he is completely committed to preserving value by improving our growth profile, our profitability, and the ability to generate sustainable cash flows from our automobile-related businesses."
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Langan also issued a double-down rating on General Motors, bringing the carmaker to ''underweight'', with a 55% reduction in the target price, which now stands at $33 per share, citing similar cost concerns related to its shift into battery electric vehicle manufacturing.
Nickel prices, a key component in battery manufacturing, have increased by 33.8% this year to $27,700 per ton on the London Metals Exchange, while lithium carbonate prices have increased by 60% from early 2021 levels.
As the organization plans to negotiate a new labor agreement with the United Autoworkers Union for the coming year, the analyst noted wage increase concerns.
GM and the IndependentSINTTIA union in Mexico agreed a new agreement on CPI at a two-decade high, which, according to union officials, "includes a financial package of salary increases and economic benefits that are above inflation."
Ford stocks were marked 4.75% lower in pre-market trading to indicate an opening bell price of $12.22 each, a move that would extend the stock''s year-to-date decline to 41.4 percent. General Motors'' stock, however, was 5% reduced to $35.41 each.