Automakers Say Year’s Outlook Is Weaker, and Stocks Plummet

The economy may be humming, but for U.S. automakers, the year is looking less bright.

All of Detroit’s Big 3 automakers issued downward revisions on Wednesday in their financial forecasts for the year. The moves, made as the companies announced second-quarter earnings, sent their shares down sharply.

General Motors said a decline in its quarterly income largely reflected rising commodity and materials prices. Ford and Fiat Chrysler singled out difficulties in their operations in China, and both said they were undertaking aggressive efforts to regain momentum.

The reference to commodities prices signaled that the Trump administration’s tariffs and trade policies were already hurting auto company profits and might yet worsen the situation, said Efraim Levy, a stock analyst at CFRA Research.

“It’s been a bad day for auto stocks,” he said. “Commodities and tariffs and their interrelationship are weighing. It’s the big picture that’s hitting the outlook.”

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 and Fiat Chrysler both reported their earnings before the market opened. GM shares ended the day off 4.6 percent, and Fiat Chrysler was down 11.8 percent.

Ford’s announcement came after the close of trading, and its shares were off about 4 percent in extended trading.

GM said its pretax profit fell 13.3 percent to $3.2 billion, with its North American operations feeling a significant hit. The automaker 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.”

In its earnings report, GM said it now expected adjusted earnings of about $6 per share for 2018. Earlier this year, it forecast earnings in line with last year’s figure, which was $6.62.

For its part, Ford coupled its report about the latest quarter with news that it had put off the unveiling of its long-term strategy, scheduled for September, until “more specifics can be shared on global redesign and restructuring.” It said those efforts could entail charges of $11 billion against pretax earnings over three to five years.

The company said its net income for the quarter was $1.1 billion, almost $1 billion lower than in the comparable period last year. It also revised its forecast for the year’s earnings to a range of $1.30 to $1.50 per share, from the previous target of $1.45 to $1.70.

While its North American business was strong in the quarter, Ford said, it was a “particularly challenging period” elsewhere, and the company “is focused on China and taking urgent action to address underperformance.”

Fiat Chrysler also said it had suffered a decline in earnings because of trouble in China, despite 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.

Fiat Chrysler now expects adjusted pretax profit of 7.5 billion to 8 billion euros ($8.8 billion to $9.4 billion), a drop of up to 14 percent from the 8.7 billion euros it forecast on June 1, reflecting how rapidly conditions in the industry have turned.

The company has been lagging behind its rivals in China, and on Wednesday its new chief executive, Mike Manley, blamed several factors: its dealer network, its marketing and growing competition from Chinese brands. “So there are certainly a combination of things that we need to fix,” he said. “That process has started.” Manley, previously head of the company’s North American operations, was named Saturday to succeed Sergio Marchionne, who was gravely ill and died Wednesday.

Automakers have warned the Trump administration in recent weeks that tariffs could have a negative impact on their industry. In a filing to the Commerce Department in June, GM said tariffs could lead to “less investment, fewer jobs and lower wages” and that the cars hit hardest would probably be those aimed at consumers who could least afford an increase. Slower demand would require cuts to production, which “could lead to a smaller GM,” the company wrote.

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.

There were signs Wednesday afternoon that trade tensions were easing on one front as Trump and the president of the European Commission, Jean-Claude Juncker, announced in Washington that they would work together to lower tariffs and trade barriers.

Juncker’s visit came as the Trump administration was considering expansive tariffs on foreign automobiles and auto parts, a move that could upend supply chains and prompt retaliatory moves. Last month Trump ordered an investigation into whether imported cars and automotive components pose a national security risk, calling for penalties that were expected to be as high as 25 percent.

While companies have pointed to the potential damage from the turn in trade policy, the president has promoted tariffs as a way to protect U.S. businesses and workers, aiming at dozens of nations with metal tariffs, as well as bringing broader levies against Chinese goods.

Automakers in the United States import parts and materials from overseas to build vehicles. The president’s threat to pull out of the North American Free Trade Agreement could hurt the industry’s supply chain, which integrates operations in the United States, Canada and Mexico.