General Motors earnings fell sharply in the second quarter, in large part because of rising commodity and materials prices, the company said Wednesday. The setback was a sign that the Trump administration’s tariffs and trade policies may be beginning to pinch automakers.
The disappointing report, along with a setback in Fiat Chrysler’s outlook, sent shares of the two companies down substantially on Wednesday morning. G.M. declined almost 8 percent and Fiat Chrysler was off 14 percent.
G.M. said its pretax profit fell 13.3 percent to $3.2 billion and lowered its outlook for 2018 mainly because of “recent and significant increases in commodity costs,” with its North American operations feeling a significant hit.
And looking ahead, the company reduced its earnings forecast for the year to about $6 a share, down from $6.30 to $6.60.
President Trump has imposed tariffs on imported steel and aluminum, moves that raise costs for automakers, who are major purchasers of those metals.
G.M. said it was also affected by economic turmoil in South America and unfavorable exchange rates related to the Brazilian and Argentine currencies.
On a conference call, Mary Barra, the G.M. chief executive, said, “I think it’s in everyone’s best interest to have a strong U.S. auto industry, a big provider of quality jobs.” The company, she added, is “making sure we spend a lot of time with the administration” so that decisions “aren’t made that have unintended consequences.”
Separately, Fiat Chrysler said it had suffered a decline in earnings because of trouble in China, and reported a rise in North American profits. The company also reduced its revenue outlook for the year.
“‘Not overly concerned today, but we obviously need to keep an eye on commodity prices as we move into 2019,” Fiat Chrysler’s chief financial officer, Richard K. Palmer, said in a conference call.
G.M. and other automakers have warned the Trump administration in recent weeks that tariffs could have a negative impact on their industry. In filing to the Commerce Department in June, G.M. said tariffs could lead to “less investment, fewer jobs and lower wages” and that the cars hit hardest would probably be those aimed at consumers who could least afford an increase. Slower demand would require cuts to production, which “could lead to a smaller G.M.,” the company wrote.
Fiat Chrysler has said it is making contingency plans to reduce the impact of tariffs, while BMW has already said it will shift some production from its plant in South Carolina to avoid any retaliatory tariffs other countries could levy on vehicles exported from the United States.
In its own statement to the Commerce Department, Toyota said the cost of its popular Camry sedan would rise $1,800, if subject to new tariffs. The car is built in Kentucky, but 30 percent of its materials come from abroad.
Harley-Davidson has also said it would move some of its production outside the United States to avoid retaliatory measures by the European Union.
While companies have pointed to the potential damage from the turn in trade policy, the president has promoted tariffs as a way to protect American businesses and workers, aiming at dozens of nations with metal tariffs, as well as bringing broader levies against Chinese goods.
The administration has already put levies on imported steel and aluminum, and last month Mr. Trump ordered an investigation into whether imported cars and automotive components pose a national security risk, calling for penalties expected to be as high as 25 percent.
Automakers like G.M. and Fiat Chrysler import parts and materials from overseas to build vehicles. The president’s threat to pull out of the North American Free Trade Agreement could hurt the industry’s supply chain, which integrates operations in the United States, Canada and Mexico.