Ford and General Motors enter a new phase of uncertainty on prices and demand

DETROIT – Let's speech astir pricing power.

At least, General Motors and Ford Motor apt volition beryllium doing that this week arsenic they study fourth-quarter results and 2023 guidance, with Wall Street watching for signs of weakening user request and a tougher pricing landscape.

Either contented would mean little profits this twelvemonth for the automakers, which are expected to study comparatively coagulated fourth-quarter results implicit subdued year-ago earnings. GM is expected to study fourth-quarter net per stock of $1.69, a 25% summation implicit the year-ago period, portion Ford is expected to study EPS of 62 cents, much than doubling the 26 cents it posted a twelvemonth earlier, according to Refinitiv statement estimates.

Automakers person reported grounds results successful caller years amid the choky proviso of caller vehicles and resilient user demand. They person banked connected sustained pent-up demand arsenic inventory levels normalize, hoping to debar dense discounts oregon incentives to determination vehicles.

But that script is dilatory neutralizing. And that leaves caller conveyance prices and profits successful flux.

Cox Automotive reports the Detroit automakers person among the highest inventory levels successful stock, noting conveyance numbers disagree greatly by brand. Plus, incentives are dilatory rising.

There's wide interest that the pent-up request was mostly eroded amid recessionary fears and affordability issues resulting from rising involvement rates and record-high prices of astir $50,000 connected mean for a caller vehicle.

Ford connected Monday cut the starting prices connected its electrical Mustang Mach-E, weeks aft EV manufacture person Tesla slashed its own prices.

Duncan Aldred, caput of GM's GMC brand, signaled the motortruck and SUV marque expects to proceed expanding its mean transaction price, which helium said deed a caller grounds of much than $63,405 during the fourth-quarter.

Those rising transaction prices are owed successful portion to redesigned pickups and the motorboat of the electrical Hummer SUV, which tops much than $110,000. GM started accumulation of that SUV this week astatine a works successful Detroit, the institution said during a media roundtable Monday.

GM is scheduled to report its results Tuesday earlier markets open, followed by Ford after the bell Thursday.

Wall Street has been bracing for a "demand destruction" script for the past respective quarters, which means overmuch of Wall Street's absorption this week volition beryllium connected the automakers' 2023 guidance.

Goldman Sachs expects the forecasts to beryllium beneath consensus, "driven by terms and premix arsenic good arsenic little fiscal services profits."

GM is expected to usher toward a astir 20% diminution successful adjusted net per stock for the afloat twelvemonth 2023, according to Refinitiv estimates. Ford's 2023 EPS is expected to autumn by astir 16% compared with 2022.

"We estimation GM and Ford could spot a notable diminution successful profitability this year, arsenic net tin beryllium weighed down by conveyance pricing declines and losses from increasing EV volumes," Deutsche Bank expert Emmanuel Rosner wrote successful an capitalist enactment earlier this month.

Rosner said that guidance hazard is already good anticipated, and shouldn't dent the stocks, however.

Morgan Stanley's Adam Jonas expects the deteriorating pricing, lower-cost conveyance premix and declining net from automakers' fiscal arms to "potentially initiate restructuring and chopped 'special projects' to support the bottommost line," helium said successful a enactment to investors past week.

Amid persistent recessionary fears, automakers person yet to denote important layoffs oregon outgo cuts akin to those that person deed different sectors, particularly tech, hard. Wall Street volition beryllium anxious for an update connected those fronts this week.

Ford reportedly plans to chopped up to 3,200 jobs crossed Europe and determination immoderate merchandise improvement enactment to the United States, Germany's IG Metall national said past week. GM, which sold its European concern successful 2017, has not announced specified actions.

GM and Ford person said they volition proceed to put successful EVs careless of macroeconomic factors. Any alteration successful those plans would beryllium notable for investors arsenic well.

— CNBC's Michael Bloom contributed to this report.