Goldman Sachs upgraded the U.S. auto sector to neutral from cautious, citing the likelihood of a bottom in auto sales, and also raised its rating on Ford Motor Co (F.N) to buy as it expects the company to benefit the most from structural changes within the sector.
Shares of Ford were up more than 9 percent to $4.15 in trading before the bell Wednesday after Goldman said Ford shares were worth $6, and added the stock to its Americas conviction buy list. Goldman previously had a neutral rating on the stock.
With General Motors Corp (GM.N) and Chrysler likely to file for bankruptcy in coming weeks... we think the stage is set for a sea change in the structure of the US auto industry, Goldman analysts, led by Patrick Archambault, wrote in a note to clients.
The analysts expect this structural change in the sector will significantly alter the competitive and economic landscape by paring down industry capacity and retracing market shares through a diminished presence from GM and Chrysler.
We believe the best way to capitalize on this upside opportunity lies with Ford, which (we) think will avoid bankruptcy, they said.
Ford is well positioned to capitalize on a more than 50 percent decline in Chrysler share and the reduction of GM's product portfolio, they added.
The analysts said Ford, which has not asked for government aid, has sufficient liquidity to make it through to 2010 without additional funding.
They raised their 2009 auto sales estimate to 11 million units from 10 million units to reflect the likely impact of a scrappage plan -- a program that offers incentives to owners for turning in older vehicles.
The prospects for a scrappage plan endorsed by the Obama administration has the potential to add between 750,000 to 1 million units to new vehicle sales, the analysts said. Shares of Ford closed at $3.80 Tuesday on the New York Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Jarshad Kakkrakandy)