Ford, GM financial arms may incur write downs

The weakening used-vehicle market creates a growing problem for the financial arms of GM and Ford as residual values of lease vehicles are likely to be significantly lower than originally expected, analyst Brian Johnson said.

"This is especially true for traditional trucks, which have been disproportionately hurt by the accelerating mix shift towards more fuel-efficient cars," Johnson said.

Surging oil prices are driving the U.S. auto market to near-decade lows and forcing Americans to avoid trucks and sport utility vehicles in favor of more fuel-efficient cars.

In addition to the mix shift seen in the new vehicle market and rising gas prices, large sports utility vehicles (SUVs) and pickups have seen the greatest price decline in the used-vehicle market, Johnson said.

"Compounding the issue is the fact that about 75 percent of the financed vehicles were light trucks for 2006-2008 FMCC vintages," Johnson said.

With large pickups and SUVs accounting for 40 percent to 50 percent of light truck sales and assuming that 75 percent of financing was for light trucks, the financial arms of Ford and GM will likely incur write downs, Johnson said.

Ford relies on the sales of light trucks, including the market-leading F Series pickup trucks, for about 64 percent of its sales in the U.S. market, the world's largest.

On Thursday, GM said it delayed plans to redesign its line-up of pickup trucks and SUVs as demand for the vehicles has dropped.

Shares of GM closed at $14.79 Thursday on the New York Stock Exchange, while those of Ford closed at $6.32.