In May, Ford Motor Company (F), the second-largest US automaker, had its worst monthly performance in 2019. Last month, Ford stock fell 8.9% compared to 6.6% losses in the S&P 500 Index. General Motors (GM), Fiat Chrysler Automobiles (FCAU), Toyota (TM), and Honda (HMC) lost 14.4%, 9.3%, 4.9%, and 11.8%, respectively, in May.
What drove massive losses in Ford stock?
In May, the US-China trade war took an ugly turn. President Trump increased tariffs on Chinese imports worth $200 billion starting on May 10. In retaliation, China increased tariffs on US imports worth $60 billion starting on June 1.
The US-China trade war has been haunting automakers for over three quarters. The slowing Chinese economy and deteriorating trade relations between the US and China have forced many automakers to cut the future outlook.
Investigation against Ford
In the last week of April, Consumer Reports reported that “The U.S. Department of Justice has opened a criminal investigation” into concerns about Ford’s emissions certification process,” citing an email conversation with Kim Pittel, Ford’s vice president for sustainability, environment, and safety engineering.
The news came a few months after Ford said in February that it hired an outside company to investigate “the vehicle road load specifications used in our testing and applications to certify emissions and fuel economy.” However, Ford mentioned that the investigations “do not involve the use of defeat devices” in its cars.
While the Department of Justice’s probe against Ford is still ongoing, any negative outcome of the investigation could harm the company’s brand image and hurt investors’ sentiments. These factors played a key role in driving Ford stock down last month.