GM and Ford expected to release strong profits amid price drop

Investors are eagerly looking forward to General Motors and Ford Motor releasing strong profits for 2022. Investors are optimistic about positive financial results following the automakers’ release of premium-priced sports utility vehicles (SUVs) and pickup trucks.

Investors await strong profits from GM and Ford

The two automakers need to post solid financial results for 2022 in the coming week to convince investors that their models are still profitable. The two rivals are facing the same challenges other automakers face, such as the increased cost of EV batteries and the rising interest rates, which have reduced consumer purchasing power.

One of its main rivals in the EV sector, Tesla, is already reducing prices to maintain demand, which could force the Detroit-based companies to change their business models in the coming year. However, a significant change will be determined by whether the companies meet their profit expectations for the 2022 fiscal year.

GM and Ford are making notable changes

There are some signs that both GM and Ford could be scaling back their spending to keep up with the competition as they evolve according to the changing economic climate. GM has already put plans to create a fourth EV battery plant on hold. The plant was set to be launched in North America.

Ford is also holding talks with worker unions in Germany as the automaker plans to reduce its workforce in Europe. Ford is also exploring the possible sale of a vehicle assembly plant in Germany. In October last year, Ford halted funding for Argo AI, an autonomous vehicle affiliate company.

GM and Ford need to factor in the possibility of an economic slowdown or a recession in the United States. The raw materials for EV batteries are also increasing, with EV maker Tesla slashing prices for its Model 3 and Model Y vehicles by around 20%.

According to Morgan Stanley, Ford’s price increase added around $3 billion annually to Ford’s pre-tax numbers. Moreover, the price increase was equal to over 2100% of the gains reported in Ford’s pre-tax profits in 2022.

GM Motors also increased prices, with this increase attributed to an additional $2.1 billion in the pre-tax profits reported during the third quarter compared to the results released in Q3 2021. The increase accounted for almost half of the pre-tax profits reported during the period.

GM Motors has already informed investors that it plans to use $35 billion between 2020 and 2025 to create electric and automated vehicles. On the other hand, Ford has estimated that its EV investments will cost $50 billion by 2026. Therefore, if an economic slowdown or a recession happens, the two companies need to make significant changes to maintain financial strength.