Markets & Finance

Banc Of America Downgrades GM and Ford

Banc Of America downgrades General Motors (GM) and Ford (F) to sell from neutral.

Analyst Ronald Tadross says he's looking at the company's 3-year cost-of-ownership indicates GM continues to suffer about a 15% disadvantage, vs. major competitors. He thinks this could widen.

He thinks the current strategy of trying to raise prices exacerbates this, yet a strategy of reducing prices would hurt earnings further. He believes a turnaround plan would be difficult to execute and a bond rating downgrade would further pressure resale values.

Tadross doesn't think new truck volumes in 2006-2007 will be enough to offset challenges. He cuts his $3.50 2005 earnings per share estimate to $3.00 and his $32 target to $27.

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