Ford and GM are experiencing a surge in demand for new vehicles from retail and commercial customers in the United States, surpassing initial expectations. This positive trend was highlighted by top executives from both companies, aligning with a report from the U.S. Commerce Department, which revealed an unexpected rise in retail sales in May. Consumers were purchasing more motor vehicles and various other goods.
During a Deutsche Bank investor conference, General Motors’ Chief Financial Officer, Paul Jacobson, expressed optimism about the company’s performance for the full year, stating that if consumer strength persists, they could exceed their previous projections. In a separate interview at the same conference, Ford’s Chief Financial Officer, John Lawler, acknowledged the resilience of the consumer and emphasized the continued strength and pricing power within Ford Pro, the company’s commercial business segment.
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These statements from the CFOs mark a significant shift from earlier this year when many economists and some auto industry executives were preparing for a potential U.S. recession. In January, Tesla CEO Elon Musk even predicted a “serious recession” and subsequently reduced prices on the company’s electric vehicles. However, since then, U.S. vehicle sales have stabilized, and production levels have nearly returned to pre-pandemic levels as supply chain challenges have eased.
Jacobson and Lawler affirmed their commitment to cost-reduction programs that have already led to significant job cuts in their respective companies. Ford and GM face pressure to fund the launch of new electric vehicles, which, in the short term, may yield lower profits compared to traditional combustion-engine trucks and SUVs.
On the stock market, Ford’s shares rose 1.1% to $14.36, while GM’s shares increased by 1.5% to $37.93 on the New York Stock Exchange.
Lawler stated that Ford anticipates ongoing strength and growth in its combustion-engine vehicles for the next few years as it intensifies investments and production of electric vehicles. Simultaneously, the company is focused on reducing engineering and manufacturing costs by 50% for its second-generation EVs, including a successor to the F-150 Lightning expected to debut in the mid-2020s. Lawler hinted at Ford potentially adopting Tesla’s approach of using large underbody castings to further reduce costs in future electric vehicles.
Jacobson emphasized GM’s commitment to reducing annual operating costs by $2 billion. As the company faces increasing costs associated with electric vehicles, Jacobson emphasized the need for continual improvement in cost reduction rather than viewing it as a one-time program. Both executives acknowledged the benefits of joining Tesla’s EV charging network and adopting its NACS (North American Charging Standard) charging protocol, expecting cost savings and enhanced convenience for their EV customers. Jacobson also mentioned the potential for future partnerships with Tesla in developing additional locations for EV chargers.
Source: Reuters
