Trump's tariff pledges rattle US, European auto shares (updated)

Magna International

26/11/2024 17:22

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      Tariffs may be a negotiating tactic - CFRA
    

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      Automakers prefer Mexico due to lower costs, proximity to
US
    

  
 (Updates shares, adds analyst comment in paragraph 16)
    By Nathan Gomes and Samuel Indyk
       LONDON, Nov 26 (Reuters) - Shares of U.S. and European
automakers dropped on Tuesday after President-elect Donald Trump
pledged steep tariffs on Canada, Mexico and China, threatening
the industry's tightly knit supply chains and raising investor
concerns of higher costs.
    Trump said in a post on Truth Social he would impose a 25%
tariff on all products from Mexico and Canada, and an additional
10% tariff on goods from China, on his first day in office in
January.
    Many automakers have built factories in Mexico to take
advantage of relatively cheap labor and the country's proximity
to the lucrative U.S. market, while China is a supplier of
certain key components.    
    "If implemented, this (tariffs) would spell disaster for the
U.S. auto industry and Detroit Three manufacturers, all of whom
import significant numbers of vehicles from Canada and Mexico,
as well as Volkswagen and other European OEMs," Bernstein
analyst Daniel Roeska said in a note.
    "But given the wide-ranging negative implications for
industrial production in the U.S., we expect this is unlikely to
happen in practice."    
    Shares of U.S. automakers General Motors  GM.N  and Ford
Motor  F.N  were down 7.5% and 1.7%, respectively. Toyota
Motor's  7203.T  U.S.-listed shares were down 1.7%.
    Among European automakers, Jeep maker Stellantis  STLAM.MI 
and Volkswagen  VOWG_p.DE  were down about 4% and 2%. A basket
of autos and parts stocks  .SXAP  was the worst-performing
sector in Europe, down about 1.8% versus a 0.6% fall for the
broader STOXX 600  .STOXX .
    Stellantis and Ford declined to comment on Trump's post,
while rivals GM and Toyota did not immediately respond to
requests for comment.
    Last week, GM CFO Paul Jacobson said the automaker had some
assets in Mexico.
    "We're going to continue to work with the administration
because I think our goal is very consistent with what the
administration's goal is in terms of U.S. jobs and what that can
mean," he told a Barclays conference when asked about potential
tariffs.
        Ford CFO John Lawler said last week the automaker would
have to see what level of tariffs were imposed and decide on
pricing.
    In a note published last week, Evercore ISI said every 10%
tariff on Mexico is a 20% earnings-per-share risk for GM, and
10% for Ford.
    "We estimate that each extra 1pp on tariff could impact
pre-tax profit by ~Eu160mn or 1.4% of 2025 expectations,"
Italian broker Intermonte said on Stellantis.
    About a quarter of vehicles sold by Stellantis in North
America are made in Mexico.
    
    
    Canadian auto supplier Magna International's  MGA.N 
U.S.-listed shares fell 3%, while peers Aptiv  APTV.N  and
Borgwarner  BWA.N  fell about 2% each.
    "We view the tariff threats as more of a negotiating tactic
to get the other countries to make concessions on various other
issues such as illegal immigration," said CFRA Research analyst
Garrett Nelson.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
U.S. firms lead car exports from Mexico to North America    https://reut.rs/3OrmxnX
Global companies that might be affected by Trump's promised
tariffs     urn:newsml:reuters.com:*:nL2N3MX0E3
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Samuel Indyk, Lucy Raitano, Nathan Gomes; Editing
by Maju Samuel and Devika Syamnath)
 ((Samuel.Indyk@thomsonreuters.com))