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GM, Ford confront Wall Street's recession fears

By Joseph White

DETROIT (Reuters) - General Motors Co and Ford Motor Co are about to replay a script they have played out many times before - trying to convince investors they can get through a recession without skidding into the red.

Analysts have been cutting share price targets and profit estimates for the Detroit automakers over the past several weeks, in tandem with downbeat outlooks for the global economy. High energy prices, rising interest rates, inflation, snarled supply chains and stubborn persistence of the COVID virus all bode ill for automaker profits, analysts said.

At the same time, some analysts say a recession could be mild, and demand for vehicles could recover more swiftly than in the past. One big difference from past slowdowns is that GM and Ford's U.S. dealers are not sitting on big inventories of unsold vehicles that would have to be discounted to sell.

"We believe the set-up over a multi-year horizon is skewing more positively," Bank of America analyst John Murphy wrote in a note, citing lean inventories and pent-up demand from consumers who held off buying as vehicles became scarce and expensive.

Both GM and Ford also have healthy balance sheets, certainly compared to the period leading up to the 2008-2009 financial market crisis that pushed GM into bankruptcy.

GM, which reports results on Tuesday morning, has stuck to its full-year profit guidance, even after disclosing that it had 95,000 vehicles in stock that it could not ship during the second quarter because of missing parts. GM said earlier this month it expects second quarter net income of $1.6 billion to $1.9 billion, below analysts' expectations of $2.56 billion, as per Refinitiv data.

Ford also kept to its outlook for full-year operating profit of between $11.5 billion and $12.5 billion.

However, Ford is still wrestling with high costs for recalls, and heavy investments to develop more electric vehicles. Bloomberg reported last week that Chief Executive Jim Farley could order that as many as 8,000 jobs be cut from the payroll, largely in operations that support combustion vehicles.

Ford has not commented on the report. But Farley has said several times in recent months that Ford has too many people and is spending too much on quality problems.

(Reporting By Joe White in Detroit; Editing by Bernadette Baum)