Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of the Detroit Automakers Are Getting Hammered Today

By John Rosevear - Mar 16, 2020 at 12:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors hate uncertainty, and things are very uncertain right now.

What happened

Shares of the three Detroit automakers were all sharply lower on Monday morning, as investors scrambled to come to terms with the likelihood of extended factory shutdowns in North America and Europe.

As of 10:30 a.m. EDT today, shares of General Motors (GM -1.59%) were down about 12.8%, the stock of Ford (F -2.46%) was down about 8.7%, and shares of Fiat Chrysler Automobiles (FCAU) were down about 22% from Friday's closing prices.

The factory's entrance.

Fiat Chrysler's factory in Mirafiori, Italy, is one of eight European plants that are now shut down due to the coronavirus. Image source: Fiat Chrysler Automobiles.

So what

Here's where things stood as of 10:30 a.m. EDT Monday:

  • Fiat Chrysler Automoblies (FCA) said that it has halted production at most of its European factories in a bid to manage supplies at dealers. It said that by freezing production now, it expects to be able to restart promptly as soon as health and market conditions allow.
  • Eight FCA factories are affected: six in Italy, and one each in Serbia and Poland.
  • Parts shortages are a growing factor for all of the automakers. Brembo, an Italian maker of high-performance brakes, said on Friday that it is shutting down its four factories in Italy. Many other suppliers in Europe are expected to follow this week. 
  • Ford, GM, and FCA, together with leaders of the United Auto Workers, said on Sunday that they have formed a task force to coordinate measures to limit the spread of the novel coronavirus at sites in the United States. 
  • Local union leaders are calling on Ford to shut down a factory in Louisville, Kentucky, after a worker self-quarantined with virus symptoms. The factory makes the popular Escape and Lincoln Corsair SUVs.
  • Ford and GM last week instructed most of their white-collar employees to work from home until further notice.

Now what

It's still early to try to predict with any accuracy the effects of likely plant shutdowns on the Detroit automakers. Clearly, all three are in for a very tough first half of 2020, at minimum. But it will take some time for analysts, and the companies themselves, to be able to estimate the costs of responding to the COVID-19 pandemic. 

That said, all three companies have hefty cash reserves, and all should be able to ride out this crisis. For long-term investors, watching and waiting is probably the best strategy for now.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
$11.52 (-2.46%) $0.29
General Motors Company Stock Quote
General Motors Company
$33.45 (-1.59%) $0.54
Fiat Chrysler Automobiles N.V. Stock Quote
Fiat Chrysler Automobiles N.V.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.