GM, Ford finally get some love on Wall St.

DETROIT — After years of indifference and sometimes outright disdain for legacy automakers, Wall Street seems to be changing its tune about General Motors and Ford Motor Co.

Both companies' shares have risen more than 30 percent so far in 2021. GM stock last week soared to its highest level since the company's 2010 initial public offering. Ford stock has nearly tripled since last March and is up roughly 70 percent since Jim Farley became CEO in October.

The Detroit automakers' performances so far this year have even outpaced Tesla Inc., which analysts have long praised as a leader in electric vehicle development and connected-vehicle technology. The gains come after a flurry of announcements related to partnerships and EV production.

"I think there's an impressive level of innovation coming out of traditional OEMs," Philippe Houchois, a managing director at Jefferies, said on a panel at a Society of Automotive Analysts event last week.

GM shares surged on last week's news that Microsoft joined a $2 billion round of funding for self-driving startup Cruise, of which GM is majority owner. That followed GM CEO Mary Barra's CES presentation this month in which the company launched a commercial EV brand with FedEx as its first customer and revealed a new corporate logo and marketing strategy centered on EVs.

Ford, too, is betting big on commercial EVs. It unveiled in November the 2022 E-Transit van and is positioning its upcoming F-150 electric pickup as a workhorse for businesses. Ford last month began shipping the first Mustang Mach-E electric crossovers, which have over-the-air-update capability.

GM has wowed the investment community with the scope of its EV ambitions.

The company has earmarked $27 billion for electric and autonomous vehicle development and plans to launch 30 EVs globally through 2025.

The EV600 commercial van, expected to begin production in November, will anchor its BrightDrop commercial vehicle brand. Analysts have argued that the commercial space could be ripe for EV sales, since those customers shop differently from traditional retail buyers.

"What Mary Barra and the team are doing at GM — and look, there's still room to go — but what they're doing may end up being one of the most profound strategic turnarounds not just in the auto industry, but in business," Morgan Stanley analyst Adam Jonas said on CNBC last week. "Our clients still don't quite believe it yet, and in our opinion, the best is yet to come."

Ford shares rose last week partly in response to a Deutsche Bank note that was optimistic about the company's 2021 profit outlook, which will come when the automaker reports earnings Feb. 4. However, the company warned of multiple charges that will appear on the report, including $2.5 billion to end manufacturing in Brazil, $1.5 billion related to its pension funds and $610 million for a Takata airbag recall.

Several analysts were impressed recently after getting behind the wheel of the Mach-E.

"Ford is showing more and more signs of becoming a credible contender in battery electric vehicles," J.P. Morgan analyst Ryan Brinkman wrote in an investor note this month.

He said that while he doesn't expect Ford to rival Tesla's EV sales volume, he does "expect investors to increasingly take seriously its competitiveness in this area."

Ford and GM face challenges in maintaining their momentum.

The companies must successfully launch their upcoming products, many of which are based on new, complicated electric platforms. They also face a flurry of competition not only from Tesla but a number of startups.

It's not enough for Ford and GM to launch competitive EVs, said Houchois, of Jefferies. They also need to show they're shedding the traditional business models that analysts think will weigh down their balance sheets.

"Either you try to shrink those legacy issues, which is complicated, or you try to dilute them" with new business models, he said. "If you look at the valuation recently of GM, they've given a story of hope."