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Ford (F) and General Motors (GM) Stocks Rally On Trump???s Approval

Joseph Lu

The auto industry rallied today after aligning themselves with President Trump’s “Made in America” theme. Both Ford Motor Company F and General Motors Company GM closed the day in the green, up 1.66% and 2.45%, respectively.

Ford looks to regain investors’ faith with $1.2 billion investments in three of its Michigan plants after revealing weak first-quarter earnings estimates on Monday.

Out of the $1.2 billion investment, $850 million will be put into the assembly line for the new Ford Bronco and Ranger, $200 million will be to build a new advanced data center, and $150 million into expanding the capacity of its engine plant that will add 130 new jobs.

This decision pleased not only investors but also President Donald Trump. The President of United States tweeted this morning, saying “car companies coming back to U.S.” However, Ford’s president of Americas Joe Hinrichs said the plant investments are “consistent with what we agreed to and talked about with the UAW in 2015 negotiations."

Instead of announcing a new investment, General Motors rejected activist investor David Einhorn’s split-share proposal, which both S&P Global Ratings SPGI and Moody’s Investors Service MCO said Einhorn’s proposal could hurt GM’s credit rating.

Einhorn’s Greenlight Capital GLRE proposed to split GM’s stock into two classes, one that pays a dividend to investors who would like that, and another that would track growth in the business.

The main issue that both credit rating firms have with Greenlight’s proposal is its potential to lead to reduced financial flexibility.

The New York Times reported two weeks ago that GM’s CEO, Mary Barra, plans to create 220 additional jobs in Michigan and retain 680 workers who were facing layoffs at another factory, before meeting with President Trump.

Though it may seem with President Trump’s support, the auto industry can make its investors happy. However, the auto industry still faces the problem of slow sales, the arrival of ride sharing services, catching up to mobility services investments, and self-driving cars.

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