The economy may be humming, but for American car companies, the year is looking less bright.þþAll of Detroit’s Big 3 automakers issued downward revisions on Wednesday in their financial forecasts for the year, with each highlighting rising commodities costs that stem in part from the steel and aluminum tariffs imposed by the Trump administration. The adjustments, made as the companies announced their second-quarter earnings, sent their shares down sharply.þþFord Motor recorded the worst showing of the three, as net income fell by nearly half to $1.1 billion from the same period ago. Aside from higher materials costs, Ford is struggling in Europe, South America and especially China, where it has spent heavily in recent years to expand but made just $3 million in the quarter and has watched its sales fall.þþ“The deterioration in this important global market has been swift,” Jim Farley, Ford executive vice president and president of global markets, said in a conference call. He said Ford’s joint ventures in China suffered from uncompetitive costs, weak dealer networks and a shortage of sport-utility vehicles in its model line. Ford is now “taking urgent action,” although its troubles will linger, he said.þþCasting a further cloud over the company was news it was postponing a daylong meeting with analysts scheduled for September, when Ford was supposed to detail the turnaround plan of its chief executive, Jim Hackett. Mr. Hackett was hired in May 2017 to reinvigorate Ford, but the lack of details on Ford’s plans have frustrated some analysts.þþ“The postponement of the capital markets day is a pretty big deal, Jim,” Adam Jonas of Morgan Stanley said on the call. In an unusually blunt question, he then wondered about Mr. Hackett’s future with Ford.þþ“Will you be the one delivering the message or will someone else be doing it?” Mr. Jonas asked.þþAfter replying at some length about the progress he felt the company had made, Mr. Hackett concluded by saying: “And 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.”þþThe company said its “global redesign and restructuring” efforts could entail charges of $11 billion against pretax earnings over three to five years. 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.þþFord delivered its news after the stock market close. In after-hours trading, its shares fell about 4 percent.þþGeneral Motors and Fiat Chrysler both reported their earnings before the market opened. G.M. shares ended the day off 4.6 percent, and Fiat Chrysler was down 11.8 percent.þþThe companies’ references to commodities prices signaled that the Trump administration’s tariffs and trade policies were already hurting auto company profits and might yet worsen their situations, said Efraim Levy, a stock analyst at CFRA Research.þþ“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.”þþG.M. 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 had been affected by economic turmoil in South America and unfavorable exchange rates related to the Brazilian and Argentine currencies, in addition to rising commodities and materials prices.þþOn a conference call, Mary Barra, the G.M. 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.”þþIn its earnings report, G.M. 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.þþLike Ford, Fiat Chrysler 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.þþ“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.þþFiat 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 it forecast on June 1, reflecting how rapidly conditions in the industry have changed.þþThe 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.”þþMr. Manley, previously head of the company’s North American operations, was named Saturday to succeed Sergio Marchionne, who was gravely ill and died Wednesday.þþAutomakers warned the Trump administration in recent weeks that tariffs could have a negative effect on their industry. In a filing to the Commerce Department in June, G.M. said that 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 G.M.,” the company wrote.þþFiat 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.þþThere were signs Wednesday afternoon that trade tensions were easing on one front as President 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.
Source: NY Times
