Ford downgraded amid scepticism on turnaround story

Shares in automaker Ford looked set to open in the red today after the company received a downgrade from RBC Capital.

The broker cut its rating on Ford from “sector outperform” to “sector perform”, indicating that it is taking a more neutral view on the stock.

Fading hopes

RBC´s change of stance on Ford could be a reflection of the fading hopes on tax cuts and increased spending as President Trump continues to struggle with getting key proposals through Congress.

It had previously turned bullish on the stock shortly after the president´s inauguration against expectations of tax reform, earnings improvement and a more attractive production outlook relative to rival General Motors.

Turnaround doubts

Equally, however, the downgrade reflects some scepticism over the ability of the automaker´s new Chief Executive Officer (CEO), Jim Hackett, to deliver rapid improvement.

Earlier this month, Hackett set out plans to cut costs by $14bn, divert resources away from saloons to more profitable trucks and sports utilities and beef up investment in electric cars.

RBC analyst Joseph Spak said it was still early days for Ford´s turnaround plans.

"Aside from some cost cutting that may be realisable, given the lead times in auto, most of whatever [Hackett] proposes wouldn't have an impact until 2019 or 2020 at the earliest," said Spak.