Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Ford Motor Company (F), General Motors Company (GM): Could This 50-Year Tariff Be Reason to Sell These Market Leaders?

Page 1 of 2

Ford Motor Company (NYSE:F)On a somewhat flat trading session, shares of Ford Motor Company (NYSE:F) abruptly dropped lower by 1.77%. Strangely, in a space that typically trades very close, General Motors Company (NYSE:GM) fell lower by just 0.5%. The drop is related to news concerning a 50-year old tariff, but is this news fundamentally important, and does the loss create a buying opportunity?

What’s The News?

News broke early Monday morning that the U.S. might end a 50-year tariff that analysts believe has created an unfair advantage for U.S. truck manufacturers.

The tariff requires a 25% fee paid by foreign manufacturers Nissan, Honda, and Toyota. However, this tariff is removed when trucks are manufactured on U.S. soil.

As a result, all three companies do have manufacturing plants in the U.S., but due to being Japanese companies, none are able to compete with either General Motors Company (NYSE:GM) or Ford Motor Company (NYSE:F) in the U.S in terms of quantity or scaled production. Thus, analysts believe this tariff gives General Motors Company (NYSE:GM) and Ford an unfair pricing advantage due to the lack of competition, and is why price increases for U.S. trucks have doubled the rate for cars since 2005.

What Does This Mean?

If this tariff is ended, some believe the truck market would become more competitive, and that both volume and sales per unit could decline for market leaders Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM).

On Monday, we could see the result of this fear. Ford Motor Company (NYSE:F)’s F-Series has broken records or created multi-year highs in just about every month this year and is the best selling pickup. Moreover, the F-Series has been largely responsible for Ford Motor Company (NYSE:F)’s double digit top-line growth.

General Motors Company (NYSE:GM) just recently launched its new Silverado, which has sold 284,666 models this year. While sales are strong, the Silverado significantly lags the F-Series’ 427,935 units in 2013. Therefore, Ford Motor Company (NYSE:F)’s excessive loss relative to General Motors Company (NYSE:GM) following this news is reasonable, as Ford has the most to lose.

Should You Buy?

Despite this news, I believe that any weakness in shares of either company should be viewed as a buying opportunity.

Page 1 of 2
Loading Comments...