General Motors (NASDAQ:GM) and Ford Motors (NASDAQ:F) Stock Values Go Down

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By Hanson So on October 8, 2014 Market

Morgan Stanley (NYSE:MS) warned General Motors (NASDAQ:GM) that it is now in the same risky water as its competitor Ford Motors (NASDAQ:F). During the trading session on Tuesday, General Motors (NASDAQ:GM) achieved a 52-weeks low at $31.65. The company closed the trade-day at $31.77 which was 5.9% lower.

Adam Jones, an analyst at Morgan Stanley (NYSE:MS), reduced his target price on the company’s stock by $2. He also reduced his forecast for the company’s EPS growth from 2015 all through 2017 to 24%. Jonas has estimated that General Motors (NASDAQ:GM) will generate EPS of $3.62 in 2015 and $2.86 in 2017.

The profit and loss statements of the company have been deeply affected by over 30 million auto recalls that occurred in this year. Mary Barra, the CEO, formulated a recovery plan in the previous week to help the company come out of this crisis. As part of this plan, by the next decade, the company will have achieved a growth rate of 10% from operations in North America. This would be affected by the increased prices of vehicles. Adam Jonas, however, believes that because of the balance between risks and opportunities in the auto industry of North America, this target may become difficult to achieve for the suffering company. The increased prices of vehicles may also prove to be an ineffective move considering how the customers are used-to incentives in car dealerships with the company.

General Motors (NASDAQ:GM) is planning to reduce their number of platforms. Currently they have 26 platforms and they are planning to reduce that number to four by 2025. Jonas pointed out that this will be a very expensive maneuver and can potentially cost the company millions of dollars. Even though the fewer vehicle platforms will reduce the production costs in the long run, still many analysts have pointed out that the risks attached to this strategy are too great.

General Motors (NASDAQ:GM) has also said that it is not planning to follow the footsteps of its peer Ford Motors (NASDAQ:F) to produce a truck that is made entirely of aluminium. Instead, the company will use mixtures of different materials like steel, aluminium and carbon fiber, to produce new vehicles that will have lower weight.

Meanwhile, Ford Motors (NASDAQ:F) is expecting a profit that is $2 billion shy of its estimates earlier. The company has suffered losses worth millions in South America, Russia and of course in the recalls. Ever since, the investors have been hard on the company. This month, they reduced the stock by 13.8%. Ford Motors (NASDAQ:F) also achieved a new 52-week low on Tuesday at $14.10 and fell by 2.9%.

General Motors (NASDAQ:GM) has also suffered in South America and Russia. The company reported a 26.2% YoY decline in South America and 6.6% in Europe. In the second quarter, the company calculated recall charges of about $1.2 billion. This means that the total recall cost for the company is $3 billion. Meanwhile, Ford Motors (NASDAQ:F)’s recall costs were $1 billion.