General Motors Co. (GM, Financial), a major holding of Warren Buffett (Trades, Portfolio) and David Einhorn (Trades, Portfolio), said second-quarter earnings results were adversely impacted by commodity pricing and foreign currency devaluations in South America. Such headwinds also impacted other auto manufacturing companies, including Ford Motor Co. (F, Financial) and Mohnish Pabrai (Trades, Portfolio)’s Ferrari NV (RACE, Financial).
Company lowers earnings guidance on continued headwinds from foreign policy
The Detroit-based auto manufacturer reported revenues of $36.8 billion, down 0.6% year over year and underperforming analyst estimates by approximately $500 million. Adjusted net earnings of $1.81 per share missed analyst estimates by 20 cents.
General Motors’ international segment reported $100 million in adjusted earnings before interest and taxes, down $200 million from the prior-year quarter. Foreign exchange headwinds due to the weakening of the Argentine peso and Brazilian real partially offset the company’s record China equity income of $600 million.
CEO Mary Barra and Chief Financial Officer Chuck Stevens both mentioned that while the company will continue “focusing on flawlessly executing on [General Motors’] full-size truck launches,” the company trimmed its full-year earnings guidance due to several anticipated headwinds, including higher tin, steel and aluminum costs in light of the ongoing trade war between the U.S. and China. The company reduced its full-year adjusted earnings to approximately $6 per share, down from the prior guidance of $6.30 to $6.60 per share.
Auto manufacturers trading lower on weaker earnings guidance
Shares of General Motors tumbled 7.6% from the previous close of $39.48 on the weakened earnings guidance. Likewise, shares of Ford and Ferrari declined 3.78% and 1.70%.
Fiat Chrysler Automobiles NV (FCAU, Financial) took a 15.46% nosedive: the U.K.-based auto manufacturer decreased its full-year revenue guidance between 7 billion and 10 billion euros (approximately between $8.17 billion and $11.673 billion) and adjusted earnings before interest and taxes by at least 700 million euros ($817 million).
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