Black Monday: China leads to shares plunge for automakers image

Even if investors saw a climb in shares mid-day, diagnosis the final hour left everyone, not just automakers, wondering how much should they worry over China’s economic slowdown and what impact it will have at a global level.

With auto sales in the U.S. up at the strongest rate in more than a decade, drivers and potential drivers might be intrigued by why this is happening. The reason is simple: both General Motors and Ford Motors depend on their Chinese operations.

GM sells more units in China with its partners than it actually does in the U.S. However, Fiat Chrysler has a smaller auto presence in China. Nonetheless, the Detroit Three automakers saw a big decline in their stock shares, and the percentages are even higher that the broader market indices.

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GM has been selling more cars in China than North America for a major part of the last decade, while The falling sales there will definitely weaken GM and Ford profits for the second half of the year.

There has to be a ray of sunshine for carmakers, and that is North America being a very profitable auto center, which puts off a huge part of the heat that is happening overseas. We will not know for sure if this will help automakers cushion the blow, but in a matter of weeks or months, we will take a perspective look and watch how things would have evolved.

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GM shares went down 6.1%, from $29.60 to $27.80, reaching its lowest of $24.62 in the first 30 minutes after the opening bell. Ford also saw a decline of 4.8%, down to $13.19 per share, and FCA, which has a significantly smaller presence in China, saw their shares plummeting 5.7% for the day.

 

After its worst week in four year, the Dow Jones Industrial Average saw a decline of 3.6%, losing 100 points per minute since the stock opening.