GM, Ford Stock Tanks; Rising Materials Costs Eat Profits
Ford and GM shares were down sharply yesterday after a wide-load of bad financial news hit markets. The Detroit Free Press reports "Ford stock fell to its lowest level since 1985 and the price of GM stock fell to its lowest level since 2006, near the height of speculation that the automaker would need to declare bankruptcy if it didn't speed up its turnaround." Analysts believe Morgan Stanley triggered the plunge, when they cut sales and earnings estimates for the two firms euphemistically citing "near-term headwinds." Bottom line: analysts no longer expect GM to turn a profit next year, and Ford's loss expectations dipped further. Meanwhile, Lehman Brothers issued a client note stating that rising commodity prices would add about $350 to the manufacturing cost of the average car. As the Brits would say, the Big 2.8 are getting knocked from pillar to post.