By Shawn Langlois
SAN FRANCISCO (Dow Jones) -- UBS told clients on Friday that
it's time to unload shares of General Motors Corp. and put their
money in Ford Motor Co., the only one of the major U.S. automakers
yet to accept handouts from the federal government.
The mixed take on the two companies didn't stop investors from
buying, as Ford (F) added almost 8% and GM (GM) gained 5.6% in
early trading.
"The U.S. auto industry is going through one of the most severe
contractions in history," analyst Colin Langan said. "In this
environment, companies are focused on preserving liquidity."
Ford, he pointed out, has enough cash to weather the current
slump, though a bankruptcy filing from GM or Chrysler would pose a
risk since they rely on many of the same suppliers.
Langan said GM's restructuring, which will likely include
bondholders swapping debt for equity, will be highly dilutive to
shareholders.
"Even if it receives more bailout funding, we forecast that GM
will approach its minimum operating cash," he added.
With GM struggling to stay out of bankruptcy court and retool
its business, Langan said he believes Ford has an opportunity to
take advantage of the distressed competition.
The industry received a boost Thursday when the U.S. government
signaled its willingness to continue its support by offering up to
$5 billion in financial aid to parts suppliers. The announcement
triggered a broad industry rally that spilled over into Friday.
UBS also gave BorgWarner Inc. (BWA) a neutral rating and Johnson
Controls Inc. (JCI), which Langan said has "sufficient liquidity
and should benefit from the U.S. stimulus package," a buy.
The government is slated to render a decision by the end of the
month as to whether to keep up to $39 billion flowing to GM and
Chrysler, but an announcement from President Barack Obama's auto
task force could come as early as next week, according to published
reports.