uploads/2019/04/2-41.png

Did Trump’s Warnings to the EU Worry Fiat Chrysler Investors?

By

Updated

Fiat Chrysler stock

On April 23, shares of Fiat Chrysler Automobiles (FCAU) fell about 5.0% despite the broader market’s optimism. Media reports suggesting an expansion of NHTSA’s (National Highway Traffic Safety Administration) probe into vehicles with faulty airbags could be one of the factors that drove FCAU stock down today. Now, let’s take a look at another factor that could be responsible for hurting Fiat Chrysler’s investor sentiment.

Article continues below advertisement

Trump’s warnings

On Tuesday morning, President Donald Trump severely criticized the European Union for charging steep tariffs and hurting US companies. Trump’s criticism came after Harley-Davidson (HOG) reported about a 26.8% decline in its first-quarter net profits, and it partly blamed steep tariffs for hurting its profitability. In a tweet, Trump warned the EU, saying, “So unfair to U.S. We will Reciprocate!” which could escalate trade tensions between the United States and the European Union.

This news could be another factor that pressured Fiat Chrysler stock today due to its high dependence on the European market. In 2018, the EMEA (Europe, the Middle East, and Africa) segment accounted for about 28.3% of FCAU’s total vehicle shipments.

Over the last couple of years, Fiat Chrysler’s profit margins have gradually improved, but they remain worse than the margins of other large automakers such as General Motors (GM) and Toyota (TM). In 2018, FCAU reported an adjusted net profit margin of 4.4%, compared to GM’s 6.4% and Toyota’s 7.2%. Rising trade tensions between the US and EU might force Fiat Chrysler to pay more tariffs across the border, which is likely to hurt its profitability and competitiveness more.

Advertisement

More From Market Realist