As we reported earlier, General Motors - along with Fiat - cut its forecast for profit this year as surging prices for steel and aluminum combine with swings in South American currencies to burden the largest U.S. automaker. Specifically, Bloomberg reported that raw material costs probably will be a $1 billion headwind to GM’s profit this year - roughly double its previous expectation - while the Argentine peso and Brazilian real are likely to drag on results through the remainder of 2018.
The news sent GM stock sliding, with the liquidation only accelerating after GM CFO Chuck Stevens said on the earnings call that General Motors has exposure to $1 Billion in currency losses.
The bad news did not end there, and Stevens said that he expects overall vehicle volume to be down in 2H, noting that he "can’t pull enough levers" to offset higher 2H costs.
Hoping to repeat the May 31 hail mary, when news that SoftBank would invest $2.25BN in GM's self-driving business, Stevens said he was willing to invest more in autonomous cars, if needed, but the announcement had no impact on the stock price.
Grasping at straws, the CFO also said that GM plans to sell more high-margin crew cabs pickups in the second half, although with gas prices soaring, he may find that selling SUVs may not be quite as easy any more.
And while GM got some tacit support from the WaPo earlier, which reported that Trump is planning 25% tariffs on a whopping $200BN in foreign auto imports, that did not affect the stock price, which plunged as much as 8.2%, the biggest drop since 2015.
While this is bad news for GM shareholders, it is especially bad news for David Einhorn, whose short tech basket continues to levitate, yet whose biggest long position, GM, just cost him over $60MM in intraday losses.
Will today's GM collapse be the straw that finally break's Greenlight's back? For the answer, look toward the fund's next letter.