Profit forecasts for Detroit automakers

DETROIT (Reuters) – The automobile manufacturers of Detroit General Motors Co ( GM.N ), Ford Motor Co fN and Fiat Chrysler Automobiles NV (FCA) ( FCHA.MI ) ( FCAU.N ) lowered their profit forecasts for the whole of the year on Wednesday due to escalating tariffs, hitting their stocks as investors bet that the escalation of trade disputes would hurt margins and sales.

GM cited higher costs for steel and aluminum for its reduction in 2018 earnings forecasts due to tariffs imposed by the US administration of President Donald Trump. GM shares closed down 4.6%.

Chief Financial Officer Chuck Stevens said GM had a "strong performance" in the second quarter "despite significant headwinds that have accumulated throughout the year."

GM would partially offset lower supplier prices, raising prices on the most popular models, and cutting costs, Stevens told badysts.

Ford said the rates could cost it up to $ 1.6 billion (1.2 billion pounds) in 2018 in North America.

The automaker was also hit by a 22% drop in sales in China in May this year and it is unlikely that it could increase prices for vehicles made in the United States, particularly its luxury Lincoln models.

After what Chief Financial Officer Bob Shanks described as a "very difficult quarter," Ford reduced its profit forecast for the year 2018 and its stock dropped more than 2% in the secondary market .

In the case of FCA, Chinese demand fell during the quarter due to a drop in import duties in July, resulting in an increase in incentive expenses and an increase in unsold inventory who have particularly touched Maserati, said Mike Manley to badysts. conference call.

Manley said that Chinese consumers "very, very cost conscious" were waiting for prices to fall. An increase in FCA inventories will continue to affect results as stocks are offset before the new emissions regulations, he added.

FCA shares fell by 15.5% and the automaker's results were overshadowed by the announcement that former CEO Sergio Marchionne, abruptly replaced due to a crisis has died of complications from surgery.

The FCA stated that it had fixed price contracts for most raw steels until 2018, but that it would see increases in 2019 at current prices.

Car manufacturers' warnings come amid rising fears over a trade war. Economists polled by Reuters said that the US economy would soon lose ground on rising interest rates and escalating trade disputes.

GM said raw material costs and unfavorable currencies in Brazil and Argentina would have a net impact of about $ 1 billion on its 2018 results

Most of the additional freight costs of Ford and GM affect North America, their main profit engine.

GM buys most of its steel from US producers, who have increased their prices in response to tariffs on steel imports imposed by the Trump administration.

GM sales in the US performed well in the second quarter and the automaker said its full-size pickups still operate at over 100% of capacity to meet demand. GM will start selling its new full-size vans to customers next month.

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

would reduce from approximately $ 1 billion to $ 4 billion the adjusted free cash flow related to the automobile.

FCA said its 2018 net industrial cash flow would fall to 3 billion euros ($ 3.50 billion) from an earlier forecast of 4 billion euros.

GM said it's now expecting to earn about $ 6 a share, down from its previous forecast of $ 6.30 to $ 6.60.

"The magnitude is larger than expected and the headwinds would probably have been better communicated in advance," said Citi badyst, Itay Michaeli, in a research note.

In May, Japan's SoftBank Group Corp. (19459019) 9984.T said it would invest $ 2.25 billion in the Cruise Autonomous Cruise Vehicle Unit, sending the shares of the automaker nearly 13 percent.

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

FCA was expecting a net turnover of between 115 billion and 118 billion euros in 2018, compared with a forecast of 125 billion euros, while the figure for the first half of the year was $ 125 billion. Adjusted EBIT is expected to be between 7.5 and 8.0 billion euros.

($ 1 = 0.8570 euros)