GO
Loading...

Enter multiple symbols separated by commas

Merrill Lynch Raises GM To Buy, Cuts Ford To Sell

General Motors
General Motors

Merrill Lynch raised its rating on General Motors to buy from sell, favoring shares of the largest U.S. automaker over Ford Motor , which were downgraded to sell from neutral.

The ratings changes sent shares shares of GM to their highest level since August, while Ford shares fell.

"We view GM's equity as more attractive than Ford's as the benefit of any concessions on retiree healthcare would be much greater for GM," said Merrill Lynch auto industry analyst John Murphy in a research note. "Furthermore, GM is at a much better point in its product cycle and has a much richer surplus in its U.S. pension, both of which should lend near-term support for the stock."

Murphy expects GM could use its liquidity and legacy assets, specifically its pension, to make some positive changes and reduce its structural cost base. According to Murphy, GM's pension is over-funded by $17 billion.

Murphy set a 12-month price target of $50 for GM shares.

Meanwhile, Murphy cut Ford to sell from neutral, saying the stock could be over-valued at its current level. Ford shares have risen nearly 30% since mid-December.

GM Revs Up Sales Incentives

Separately Tuesday, GM announced sales incentives on certain models sold in most of the U.S. through Feb. 20.

Zero percent financing for 36 or 60 months is available, as is $500 bonus cash, GM said.

Qualifying models include some 2006-07 Buick, Chevrolet, GMC, Pontiac and Saturn cars, trucks and sport utility vehicles. Cadillac, Hummer and Saab vehicles are excluded.

GM said earlier its year-to-year U.S. sales for January dropped 16.6 percent, including 22.5 percent for cars and 11.5 percent for light trucks. GM officials said at the time that the company spent less than its competitors on incentives during the first month of the year.

It sold 244,614 light vehicles during the month, keeping it No. 1 in sales among all auto manufacturers.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

U.S. Video

  • Cramer: Here's a sign the market could rally

    Wall Street's been soaking in red, but "Mad Money" host Jim Cramer has one signal to watch for that could point to another run.

  • Burger war maneuvers

    Cramer looks at the number of company's selling burgers and tries to determine the quality names, as well as those to avoid.

  • Cramer: What's driving defense?

    Cramer says that even though President Obama has made it clear the US can no longer be the world's policeman, the country can become the world's arms dealer. Profiting from defense spending.