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Deutsche Bank’s Lache cuts GM price target, affirms Ford buy

Feb 25, 2008 Market Outlook

Deutsche Bank sours on GM’s prospects

Analyst sees better opportunity in Ford shares

By Shawn Langlois, MarketWatch

Last Update: 1:53 PM ET Feb 25, 2008

SAN FRANCISCO (MarketWatch) — Investors looking to exploit a rebound in the U.S.
automotive sector should consider building positions in Ford Motor Co. shares
rather than General Motors Corp., according to a research note issued Monday by a
key auto-industry analyst.

But that’s not to say that Deutsche Bank analyst Rod Lache has high hopes for a
domestic industry left sideswiped by consumers feeling the angst of a brutal
housing market and stiff costs at the gas pump.

“We’ve grown increasingly concerned that the cyclical downturn in North America
could be deeper and more protracted than previously expected,” he warned clients.

Lache cut his 2008 forecast for industry unit sales to nearly 15.3 million
vehicles from an already-low target of 15.7 million. He also reduced his 2009
forecast to 16 million cars and trucks, down from 16.5 million previously, saying
that falling used-car prices and subprime-mortgage woes will continue to weigh.

Despite the tough business climate, Lache backed his buy rating on Ford (F),
saying the company’s shares offer “compelling fundamentals” and rank among the
“most defensive” of the stocks he covers.

Ford, he said, has a slightly better liquidity position than GM as stands to have
a stronger vehicle pipeline come the second half of the year.

Ford’s shares gained a little more than 1% to $6.32 in afternoon trading.

TRW Automotive (TRW), Autoliv (ALV) and Goodyear Tire & Rubber Co. (GT) are among
Lache’s favorites in the sector.

General Motors (GM), however, is no longer on the analyst’s bullish radar.

Lache downgraded the leading U.S. automaker to hold from buy, citing an unclear
outlook for its struggling residential mortgage business and a significant
overhang from former parts division Delphi (DPHIQ).

On top of that, GM faces well-chronicled competitive pressures from the likes of
Toyota Motor Corp. (TM) as well as the industry’s broader demand woes.

“Unfortunately, few of these issues appear to be nearing anything resembling a
favorable resolution, and we have increasingly focused on the near-term risks,
and potential for these risks to mitigate upside for an indeterminate period,” he
said.

Accordingly, Lache cut GM’s price target to $31 a share from $39.

Earlier this month, the company reported a fourth-quarter loss of $722 million,
or $1.28 a share, compared with a year-earlier profit of $950 million, or $1.68 a
share. GM benefited from cuts in labor costs to buck emerging subprime losses in
the final three months of 2006.

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