GM, Ford Stock Tanks; Rising Materials Costs Eat Profits

Edward Niedermeyer
by Edward Niedermeyer
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.

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  • Jkross22 Jkross22 on Mar 14, 2008

    Edward, You're being too kind to GM, Ford and Cere. Arrogance, greed and bean counting did more to eat into their profits than the cost of steel ever has or ever will. These companies stink and are run by greedy people living in a bubble.

  • Jthorner Jthorner on Mar 14, 2008

    The cost of raw materials has got to be killing them. Recently I needed to buy 10 gallons of mineral spirts. It has been several years since I last bought any and my recollection was that the stuff cost $1-$2/gallon. Wow, after shopping all around the best I could do was over $8/gallon. Over $90 including taxes for 10 gallons of mineral spirits. Here I thought I would be spending around $20 and ended up near $100. This is all starting to feel like the 1970s again. Falling dollar, falling employment, rising inflation, spiraling gas prices. The decades of cheap fuel since that time have lulled the US into a very bad spot. Any time the Canadian loonie is worth more than a US dollar you know that we are in deep doo.

  • Menno Menno on Mar 14, 2008

    I just bought $1000 in Canadian (loonie dollars) and when the bank called to tell me I needed more money in the account, I thought they were joking. In the time it took to get the money delivered to them, the US dollar had gone down sufficiently so that $1050 was not adequate to cover $1000 CDN. I had to drop more money into their laps. $1079 (including $10 "gotcha" fee by the bank) to change the money over for a vacation. It not only is starting to look like the 1970's, jthorner, it is becoming the 1970's. Gee I hope Ford don't bother bringing back the Pinto, nor GM the Vega.

  • Mikey Mikey on Mar 14, 2008

    Menno:I hear ya! but come up and visit us anyway.I go to Vegas every year, not that long ago 2000$ USD$=3000 CDN$ ouch! Of course our truck plant sits idle while the American plants get what little stock is available. Sometimes your the windshield sometimes your the bug.