Tariffs drive GM, FCA to reduce profit forecast for 2018 and affected inventory

By Nick Carey and Ben Klayman

DETROIT (Reuters) – Rates are partly at the origin Falling expectations Chrysler Automobiles NV (FCA) climbed the shares of both automakers on Wednesday as investors feared that escalating trade disputes would hurt margins and sales.

GM cited rising steel and aluminum costs for its 2018 earnings forecast Chuck Stevens, chief financial officer, said GM had achieved a "strong performance" in the second quarter "Despite significant headwinds that accumulated throughout the year"

. Stevens told badysts that GM would partially offset lower commodity prices by negotiating price reductions with suppliers, raising prices on the most popular models and cutting costs.

The new general manager, Mike Manley, told badysts at a teleconference, said Manley, adding that the inventory of unsold vehicles had "particularly affected Maserati". "Very, very cost-conscious" Chinese consumers have been sidelined in the second quarter, waiting for prices to fall. He added that the increase in the group's inventories would continue to have an impact on the results, as stocks had to be eliminated before the new regulations on emissions,

FCA shares fell by 15% to New York stock market. Sergio Marchionne, former CEO of the company, died after suffering surgical complications.

FCA has announced fixed price contracts for most raw steels by 2018, but increases in 2019 at current prices. growing fears of a trade war. Economists polled by Reuters said that a now robust US economy will lose momentum on rising interest rates and escalating trade disputes.

GM estimated that raw material costs and the unfavorable currency in Brazil and Argentina results. Previously, GM expected these costs to total about $ 500 million

Most of the costs affect North America, GM's main profit driver. GM's adjusted pre-tax margin is expected to be between 9 and 10%, compared to 10% previously.

GM purchases most of its steel from US producers, who have increased their prices in response to tariffs on imported steel GM's US sales performed well in the second quarter and the builder Automotive said its full-size pickup plants still operate at over 100% of their capacity to meet demand. GM will start selling its new full-size vans to customers next month.

GM and FCA are both betting on redesigned pickup trucks to increase sales in the United States. About 80% of FCA's second-quarter profit came from the US market and the automaker said its new trucks would help lift its pre-tax adjusted margin in North America to 10% in the second half of 2018.

Despite Rates, GM Chief Financial Officer Stevens said the recent US tax overhaul and low unemployment rate should keep new vehicle sales in the US at or below 2017 levels.

"What is going on? GM also said that higher costs would reduce auto adjusted free cash flow from about $ 1 billion to $ 4 billion.

FCA stated that its net industrial cash flow in 2018 would fall to a lower level. GM has announced that it is now expecting to earn about $ 6 per share, down from its previous forecast of $ 6.30 to $ 6.60.

"The magnitude is larger than expected and the headwinds neck It was probably better communicated in advance," said Itay Michaeli, Citi badyst, in a research note, describing the GM's prospects as "disappointing."

In May, SoftBank Group Corp announced that it would invest $ 2.25 billion in GM's self-driving vehicle, Cruise, up nearly 13 percent from car manufacturers

With the warning on Wednesday's results, all these gains were lost.

FCA expected net revenues of between 115 billion and 118 billion euros, against a forecast of about 125 billion euros, while the adjusted EBIT is expected to be between 7.5 and 8.0 billion euros, at least 8.7 billion. [19659003] Ford Motor Co will publish its results after the close on Wednesday.

($ 1 = 0.8570 euros)

(Report from Nick Carey and Ben Klayman; Edited by Adrian Croft and Nick Zieminski)

This story was not edited by Firstpost staff and is generated by self-feeding.