Where Is The Bottom LIne For General Motors And Ford?

Implications: Shares of GM and Ford fell to historic lows Thursday after Morgan Stanley Research cut its earnings forecast based on a lowered outlook for U. S. auto sales.

Analysis:  Shares of GM and Ford fell to historic lows Thursday after Morgan Stanley Research cut its earnings forecast based on a lowered outlook for U. S. auto sales. The report came on top of waning consumer confidence, higher gas prices, tightening credit availability and issues with auto suppliers.

Ford stock fell to its lowest level since 1985, closing at $5.39. GM's shares fell to its lowest level since 2006 during the day before rising slightly at the close.

The issues facing both of these U.S. automakers are no secret, how they deal with them is the big question. Lets take a closer look at GM for now.

First of all, of concern is GM's relationship to troubled captive lender GMAC. The fact that GMAC is potentially going to have difficulty refinancing as a result of the overall market conditions in the fixed-income market, is weighing on the automakers equity.

A strike by the UAW union against Detroit-based supplier American Axle & Manufacturing is also of concern to Wall Street. This lost production could be costing GM 5,300 vehicles a day, with some analysts predicting it may last throughout April.

GM is also confronted with the issue of Delphi. GM has agreed to invest more money into Delphi, one of its major suppliers, so it can emerge from bankruptcy. An investor group in Delphi's exit-financing deal is not happy with GM's increased involvement.

THE GOOD:

On the product side things look a little better. Most GM cars sold pretty well in February and GM is actually in short supply of some of them. End-of-month car stocks were 27 percent of GM's overall inventories, compared to 36 percent a year ago. Car sales were off only 1 percent in the month.

Recently launched cars led the GM highlight reel. The new Chevy Malibu and the fuel efficient, compact Colbalt, posted sizeable gains. The Cadillac CTS helped the division post a 2 percent sales increase, the only division the black for the month.

THE BAD: 

Most GM makes and models performed poorly, especially trucks and SUV's. Sales of such vehicles declined 19 percent. Sales by Saturn slumped 33 percent in February and 16 percent year-to-date. Overall, Chevy, GM's bread-and-butter division, outsold Ford division by only 1,251 units in February. Its sales were down 11 percent in February and declined 6 percent year-to-date.

So, where are we compared to a year ago? Product-wise, better, sales prospects, poor, credit/cash issues, not much better. Look out below.