By Joseph White
DETROIT (Reuters) - General Motors Co (NYSE:GM) and Ford Motor (NYSE:F) Co hope their earnings reports next week will convince skeptical investors that their decade-long efforts have succeeded at unchaining them from the U.S. economic cycle.
Wall Street suspects both companies could fall short of their 2022 profit forecasts, or underperform next year, with consumer demand dented by rising U.S. interest rates, higher oil prices and economic slowdowns in the United States, Europe and China.
"Although there has not been a significant erosion in automotive demand so far this year, 2023 weakness appears increasingly likely," analysts at Berenberg wrote in a note.
GM reports results Tuesday. Ford follows on Wednesday, having already warned investors that third quarter results will fall short of expectations because of supply chain and logistics snarls. Wall Street investors have not waited to act on wariness that demand for cars is finally entering a long-delayed cyclical downturn.
Shares in major automakers and auto dealer groups have skidded since Ford said on Sept. 19 that third-quarter profits will take a hit from to supply chain snarls and parts cost inflation, and used car retailer CarMax (NYSE:KMX) warned on Sept. 29 of softening demand.
Ford shares are down 19% since its warning, and have lost more than half their value since hitting a 52-week high on Jan. 13. GM shares are down 19% since Sept. 19. This month they dipped below $33, their 2010, post-bankruptcy IPO price.
Shares of the world's most valuable automaker, Tesla (NASDAQ:TSLA) Inc, fell on Thursday after the company warned it might not hit its full-year goal of increasing vehicle deliveries by 50% or more.
"First it was Ford, then CarMax, then Tesla. 3Q should see many more misses and weak outlooks added to the mix. Don't call us bulls (yet)," Morgan Stanley (NYSE:MS) analyst Adam Jonas wrote in a note.
So far, neither GM nor Ford has cut full-year profit guidance. Executives at both companies have said demand remains strong, and inventories are still far leaner than in the past. Tight inventories have allowed Detroit's automakers to slash the money spent on discounts and marketing.
Steve Carlisle, head of GM's North American operations, said on Wednesday the automaker has only about 20 days' worth of vehicles in stock at dealerships, compared to as many as 90 days worth before the pandemic.
"We’re optimistic as we look into the rest of this year," Carlisle told the Reuters Automotive USA conference in Detroit. "From a sales point of view, we had a very good third quarter. We’re optimistic. But it’s very dynamic."