GM versus Ford: the YTD performance spread redux

Back in late July I noted that an interesting spread had developed between GM and Ford shares of around 25% relative outperformance during the then YTD period by the latter.  And the reasons for this?  A continued bout of GM recalls plus generally good execution by the management of Ford.

So how is this spread looking now?  Well it has come in 10% or so as shown below:

So why is this?  Well both car companies have updated their views for this year, next year and beyond.  For Ford - previously so bulletproof - overtly struggled both in its 2014 guidance about American margins...

Ford expects its North American operating margin at the lower end of its 8 percent to 9 percent guidance range

...as well as the outlook for European trading in 2015:

Europe, which Ford previously said would return to profitability in 2015, is now expected to lose about $250 million because of continued volatility in Russia and higher pension expenses as a result of lower interest rates. The company continues to believe it has the right transformation plan for Europe, focused on products, brand and costs.

No wonder the shares fell off over 7% (as captured by the above chart) on the news.  

And then there's GM today who, despite all the recalls and other excitements that have blurred margins, are still stretching for substantial medium-term improvements: 

• In North America, the company expects to achieve EBIT-adjusted margins of 10 percent in 2016.
• In Europe, the company expects to return to profitability in 2016.

My guess is that the YTD spread continues to narrow.