This has not been a good week for U.S. auto manufacturers.
Sharp stock sell-offs and reined in profit forecasts hit American automakers hard this week, according to a recent Bloomberg report. Fiat Chrysler, General Motors, and Ford Motor Company all have their own sets of problems – ones that may not improve in the immediate future. Recent trading issues and stagnating models are among the reasons American automakers could be in trouble for a little while yet.
In the second quarter of 2018, Ford lost $467 million in Asia and Europe. That’s due to a variety of factors, including recent tariffs between China and the U.S., as well as waning interest in the Focus, which is set to be replaced later this year in global markets. Fiat Chrysler is also struggling in China, according to Bloomberg. Sales of the Jeep brand didn’t catch on as FCA thought they would, so it too saw a $115 million loss in the second quarter. GM lowered its earning forecasts as tariffs on steel and aluminum hit the company’s bottom line to the tune of $300 million in increased costs in the second quarter.
Under CEO Jim Hackett, Ford is undergoing a massive restructuring plan that will cut $25.5 billion in costs over the coming years. The idea is to free up capital to invest in trucks and SUVs, as the company shifts away from traditional passenger cars. However, Hackett hasn’t given enough detail to satisfy analysts, and gave little clarity on Ford’s quarterly earnings call. Morgan Stanley analyst Adam Jonas fired a short across Hackett’s bow in that call: “Will you be the one delivering the message [at the next investor’s meeting] or will someone else be doing it?” The question calls into question Hackett’s future with Ford.
The company also decided to move an investor meeting scheduled in September to a later date, when it had more specifics to share. Hackett responded to Jonas’ question by saying, “Hell yes, I expect to be in front of everybody declaring where we’re going and what we want to get done. So I think there should be zero question about that.”
Given the uncertainty surrounding Ford’s restructuring and tariffs hitting the company’s bottom line, stocks closed at their lowest point since 2012. Issues with F-150 production in May also dinged the company’s bottom line and profit projections.
GM’s Bottom Line Takes a $1 Billion Hit
General Motors’ issues have mainly come about from higher metal prices. Steel and aluminum tariffs have increased GM’s costs by $300 million this quarter. The company projects it will see a $1 billion hit to its annual earnings if the tariffs remain in place for the foreseeable future. That isn’t the only issue, however. A $100 million hit from devalued currency such as the Argentine peso and Brazilian real forced GM to lower its profit projections. Bloomberg outlines GM adjusted its earnings down, and shares fell by their highest levels since February 2017. However, they appear to be rebounding as we head through today’s trading.
GM is launching out the new Chevrolet Silverado and GMC Sierra next month. However, sales won’t be in full swing until near the end of this year. People are holding out on buying new trucks, which makes the company’s profit targets a tougher sell.
Fiat Chrysler’s Slumping China Sales
There’s a fair amount of uncertainty surrounding Fiat Chrysler’s immediate future following the sudden death of Sergio Marchionne. Mike Manley has taken over as the company’s new CEO, his position formerly being the head of Jeep and Ram brands. He has big shoes to fill, and one of the issues he’ll need to tackle is Jeep’s current state in China. Part of the company’s 2022 plan was expanding the brand in the Chinese market. However, according to Bloomberg, it’s struggled against local Chinese brands in mass market segments.
Fiat Chrysler announced weaker than expected earnings, punctuated by a $115 million loss in its Asian operations. Between that and other factors such as slumping sales and executive uncertainty, FCA stocks slumped 12 percent on Wednesday. Good news emerged on Friday, though, as President Trump agreed not to raise tariffs on European cars. On the news, stocks rebounded heading into Thursday’s trading.
Signs of what’s to come?
American automakers aren’t nearly as much in a pinch as they were back in 2008. They’re still making money, but the window may be shrinking as sales start to fall off. Passenger cars, particularly sedans, have languished in the marketplace for awhile. And while more profitable crossovers have stemmed the flow for awhile, that trend can’t go on forever.
We may not be on the verge of another “Carpocalypse” at the moment. We’ll have to see how the Big Three fare heading into this year’s auto show season, and whether their fortunes will rebound. Stay tuned to TFLcar.com for more updates!