Shares of Ford Motor Co. climbed Monday, as an analyst predicted the company is poised to benefit more from a possible retiree health care deal than General Motors Corp.
In afternoon trading, Ford shares rose 25 cents, or 3.1 percent, to $8.28, after peaking at $8.32 earlier in the day. In the past 52 weeks, Ford shares have traded between $6.85 and $9.70.
Bargainers for GM and the United Auto Workers union continued to negotiate on a new labor deal Monday, after the expiration of the previous four-year contract Friday. The union extended the contract on an hour-by-hour basis during talks.
The UAW named GM as the lead company on Thursday, meaning that once the union reaches an agreement with GM, it will pursue similar deals at Ford and Chrysler LLC.
One key issue in the negotiations has been the funding of retiree health care benefits.
GM wants the union to take over responsibility for the costs using a company-funded trust. The UAW was asking for job guarantees in exchange for taking on the costs.
Peter Nesvold of Bear Stearns upgraded Ford to “Outperform,” from “Peer Perform” saying that while GM shares have rallied in the past week on predictions of a health care deal, Ford shares actually have more upside potential.
Nesvold said that most of the best news for GM is already behind it, and it's unclear if the automaker has the liquidity it needs to fund a health care deal without raising substantial capital.
In addition, GM's retail sales have generally missed expectations in recent months and its inventories seem too high, the analyst said.
“The incremental buyer of GM shares seems event-driven, not deep value oriented,” Nesvold wrote in a note to investors. “As a result, we expect a material round of profit taking in GM by the time a new UAW contract is ratified.”
If GM is able to strike a retiree health care deal with the union, Ford will likely be able to do so as well, and its earnings should get more of a boost than GM's, he said.
In addition, the Dearborn, Mich.-based automaker's cash flow has exceeded expectations in recent quarters and stands to get an additional cash boost from upcoming asset sales.
