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Why Shares of General Motors Are Surging Today

By John Rosevear - Apr 17, 2020 at 1:47PM

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Ford warned on earnings, GM didn't. That might be good news.

What happened

Shares of General Motors (GM 0.00%) were up on Friday amid a broad-based market rally on optimism about a potential treatment for the COVID-19 virus -- and after rival Ford Motor Company (F 0.99%) warned that it will post a big loss for the first quarter.

As of 1:30 p.m. EDT, GM's shares were up about 7.6% from Thursday's closing price.

So what

GM did have some good news to share on Friday morning -- it has begun delivering ventilators to hospitals -- but it wasn't the kind of news that tends to make auto investors rush to buy stock. 

Some of GM's rise on Friday is surely attributable to the market's broader rally. But I think investors are also contrasting GM with its old crosstown rival, Ford Motor Company (F 0.99%). 

GM CEO Mary Barra, wearing a mask and eye protection, is shown on the floor of a GM factory making masks for first responders.

Ford warned of a first-quarter loss, but GM CEO Mary Barra has stayed silent on the topic. Image source: General Motors.

Ford warned on Monday that it will post an operating loss when it reports its first-quarter results later this month. It amended that statement in a filing with the Securities and Exchange Commission (SEC) on Friday, saying that it now expects to post a net loss of about $2 billion on $34 billion of revenue.

What did GM say in response? Nothing. I think investors are interpreting that as a sign that GM doesn't feel that a warning is necessary. 

Now what

With its relative silence, GM is giving investors the impression that it's in better financial shape than old rival Ford, at least for the time being. GM has been playing its cards close to its chest since the coronavirus outbreak began in the U.S. While the company did disclose that it has drawn down its credit lines (as did Ford), it pointedly didn't suspend its dividend after Ford did. 

This relative silence could make GM's upcoming first-quarter earnings report, before the market opens on May 5, quite interesting. Stay tuned. 

John Rosevear owns shares of Ford and General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
$39.48 (0.00%) $0.00
Ford Motor Company Stock Quote
Ford Motor Company
$16.34 (0.99%) $0.16

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