GM, Ford to report strong 2022 profits

DETROIT General Motors Co and Ford Motor Co are expected to report strong profits for 2022 next week, driven by premium-priced pickup trucks and sports utility vehicles SUVs. Detroit rivals must convince investors that last year's profit formula can keep working when costs for EV batteries are rising, high interest rates are cutting consumer purchasing power, and Tesla Inc is slashing prices.

There are signs that Detroit automakers are scaling back spending to offset competitive and economic pressure. In North America, GM plans to build a fourth EV battery plant.

Ford is in talks with German unions to cut thousands of jobs in its European operations and possibly sell a German vehicle assembly plant. It stopped funding autonomous vehicle affiliate Argo AI in October.

GM and Ford both rely on sales of pickup trucks and SUVs in the United States for the bulk of their global profits. In North America and other markets, both automakers plan to increase sales of less profitable electric vehicles this year.

The risk to the Detroit automakers' profitability would be a challenge in the best of times. The GM and Ford must factor in forecasts for a slowdown or even a recession in the U.S. economy.

The U.S. EV market leader Tesla is cutting prices on its best-selling Model 3 and Model Y vehicles by as much as 20 per cent.

The Model Y SUV competes with Ford's Mustang Mach-E, GM's Cadillac Lyriq EV and with combustion SUVs that the Detroit automakers sell.

Morgan Stanley estimated that increased prices added an average of $3 billion a year to Ford's pre-tax bottom line, and was the equivalent of more than 200 per cent of the company's pre-tax profits for 2022.

In 2022, 1 U.S. automaker by sales said higher prices added $2.1 billion to pre-tax profits in the third quarter compared to the same quarter in 2021 - equivalent to more than half of pre-tax profits for the period.

The company told investors it will spend $35 billion on electric and automated vehicles between 2020 and 2025. Ford is expected to invest $50 billion in EVs through 2026.

If there is a downturn, Morgan Stanley analyst Adam Jonas said what steps can they take to stay strong and invested in the future?