As the markets opened Tuesday, General Motors (GM 0.72%) found itself trading 5% lower as of 10:50 a.m. EDT, as it figuratively hitched a ride to bad news out of crosstown rival Ford Motor Company (F 1.76%). Here's what investors need to know.
It's not uncommon for major companies to warn investors of negative news before quarterly results are fully in the books, and that's exactly what Ford did late Monday when it warned that it would record roughly $1 billion extra in costs during the third quarter due to supply chain issues and inflation.
More specifically, parts shortages have negatively impacted roughly 40,000 to 45,000 vehicles, and worse yet, those vehicles were primarily high-margin trucks and SUVs. Essentially, what this means is that Ford wasn't able to ship as many of its bread-and-butter moneymakers to its dealers.
Obviously, as Detroit automakers and the global automotive supply chain are fairly intertwined, General Motors investors heard the news just as loudly as if GM itself had reported it.
Take these stock price pops and drops with a grain of salt. In fact, Ford already reaffirmed its full-year guidance in the same breath of the bad news, meaning that this is more of a speed bump rather than a permanent loss of these high-margin sales and higher costs in the meantime.
And if GM investors would rather research news on the bright side, no pun intended, BrightDrop, a wholly owned subsidiary of General Motors that focuses on commercial delivery and logistics, announced a little something called Trace Grocery. For long-term investors, learning about that type of news with upside is likely more important than a minor speed bump causing a 5% drop in GM's price today.