Can Pentagon’s Push to Boost Weapons Supply Drive GM, Ford Stocks Higher?

Senior defense officials have held talks with top executives of several companies, including General Motors’ (GM) CEO Mary Barra and Ford’s (F) CEO Jim Farley, to produce weapons and other military supplies, the Wall Street Journal reported. GE Aerospace (GE) and Oshkosh (OSK) are among the other companies that have been approached by defense officials amid continued geopolitical risks. If any such deals materialize, they could drive these stocks higher, given escalating geopolitical tensions.

Interestingly, discussions commenced prior to the U.S.-Iran conflict. The strain on weapons stockpiles indicates that more commercial partners are needed to boost supplies.

Automakers, U.S. Manufacturers Approached for Weapons Production

The Pentagon reportedly aims to tap the workforce and factory capacity of automakers and other U.S. manufacturers to ramp up production of munitions and equipment as the wars in Ukraine and Iran have depleted supplies. The talks were preliminary and broad, with officials expressing the need for American manufacturers to step up to support traditional defense companies.

Notably, discussions were held about how rapidly American manufacturers could shift to weapons production. Also, officials asked companies to flag challenges that could stand in their way of taking on more defense work, including contract conditions and any difficulties in the bidding process. Interestingly, Detroit’s auto companies redirected their manufacturing capacity for military use during World War II.

Concerns about America’s defense manufacturing capacity have been growing since the U.S. and its North Atlantic Treaty Organization (NATO) allies began sending large quantities of weapons to Ukraine following Russia’s full-scale attack in 2022. The Pentagon’s $1.5 trillion budget request is focused on massive investments in munitions and drone production.

It is worth noting that General Motors has a defense subsidiary that produces a lightweight infantry squad vehicle based on the Chevrolet Colorado ZR2 platform. GM is reportedly a leading contender to build a larger infantry squad vehicle for the U.S. Army to replace the Humvee.

Wall Street’s Take on GM, Ford Stocks

Wall Street has a Strong Buy consensus rating on General Motors stock, with the average price target indicating 24.5% upside potential. Meanwhile, Ford scores a Hold consensus rating, with the average price target implying 9.2% upside potential.