Investing.com -- Ford Motor Company (NYSE:F) shares were down more than 3% before the opening bell on Monday, after Jefferies downgraded the American carmaker to "underperform" from "hold" on concerns over inventory build-up, strategic uncertainty in Europe, and a widening gap between warranty provisions and cash outflows.
The brokerage cut its price target on Ford to $9 from $12.
"De-stocking has become an overhang," Jefferies analysts wrote, noting U.S. inventory levels had risen to 96 days in November.
Jefferies remains cautious about Ford’s ability to address a cumulative $8.5 billion gap between warranty provisions and cash outflows since 2020.
While Ford’s balance sheet is "robust," the analysts warned that potential restructuring and warranty claims could constrain cash available for shareholders.
In contrast, Jefferies retained a "hold" rating on GM with a price target of $52.
“We keep our preference for GM but stay at Hold; the decision to fold Cruise into its own ADAS efforts may support GM's near-term earnings and fund continued transfers of cash to shareholders, but leaves open the debate on re-rating,” analyst added.
Jefferies noted that the U.S. market remains a "protected oasis" amid global EV policy shifts and regulatory challenges, with stable profits concentrated among GM, Ford, Stellantis (NYSE:STLA), and Toyota Motor (NYSE:TM) Corp.
However, slowing cash generation as dealer stock rebuilding ends could affect the industry's overall momentum.