GM and Fiat Chrysler pare outlook, and shares fall sharply

pulse

July 25, 2018 3:58 PM

The disappointing report, along with a setback in Fiat Chrysler’s outlook, sent shares of the two companies down substantially Wednesday morning.

General Motors earnings fell sharply in the second quarter, in large part because of rising commodity and materials prices, the company said Wednesday. The setback was a sign that the Trump administration’s tariffs and trade policies may be beginning to pinch automakers.

The disappointing report, along with a setback in Fiat Chrysler’s outlook, sent shares of the two companies down substantially Wednesday morning. GM declined almost 8 percent and Fiat Chrysler was off 14 percent.

GM said its pretax profit fell 13.3 percent to $3.2 billion and lowered its outlook for 2018 mainly because of “recent and significant increases in commodity costs,” with its North American operations feeling a significant hit.

And looking ahead, the company reduced its earnings forecast for the year to about $6 a share, down from $6.30 to $6.60.

President Donald Trump has imposed tariffs on imported steel and aluminum, moves that raise costs for automakers, who are major purchasers of those metals.

GM said it was also affected by economic turmoil in South America and unfavorable exchange rates related to the Brazilian and Argentine currencies.

On a conference call, Mary Barra, the GM chief executive, said, “I think it’s in everyone’s best interest to have a strong U.S. auto industry, a big provider of quality jobs.” The company, she added, is “making sure we spend a lot of time with the administration” so that decisions “aren’t made that have unintended consequences.”

Separately, Fiat Chrysler said it had suffered a decline in earnings because of trouble in China, and reported a rise in North American profits. The company also reduced its revenue outlook for the year.

“'Not overly concerned today, but we obviously need to keep an eye on commodity prices as we move into 2019,” Fiat Chrysler’s chief financial officer, Richard K. Palmer, said in a conference call.

GM and other automakers have warned the Trump administration in recent weeks that tariffs could have a negative impact on their industry.

Fiat Chrysler has said it is making contingency plans to reduce the impact of tariffs, while BMW has already said it will shift some production from its plant in South Carolina to avoid any retaliatory tariffs other countries could levy on vehicles exported from the United States.

This article originally appeared in The New York Times.

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