Morgan Stanley analyst Adam Jonas downgraded General Motors to Underweight from Equal Weight with a price target of $42, down from $47. The firm also downgraded its U.S. auto industry view to In-Line from Attractive. The downgrade is driven by a combination of international, domestic and strategic factors that may not be fully appreciated by investors, the analyst tells investors in a research note. The firm says U.S. auto inventories are on an upward slope with vehicle affordability still out of reach for many households. In addition, credit losses and delinquencies continue to trend upward for less-than-prime consumers, adds Morgan Stanley. Further, China’s two-decade-long growth engine has reversed in terms of China profits flipping to losses and China producing nearly 9M units more than it sells locally, adds the firm. Morgan Stanley cites expectations for greater share loss through the end of the decade, price/mix headwinds, and China risk for the downgrades of both Ford and GM.
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