Sector Update: Consumer Stocks Advance in Afternoon Trading

The U.S. auto industry may be staring down a massive profitability crunch as President-elect Donald Trump's proposed 25% tariffs on vehicle imports from Mexico and Canada threaten to squeeze margins by nearly one-fifth, according to S&P Global Ratings.

Michigan-based automakers like General Motors Company , Stellantis N.V. , and Ford Motor Co. could lose up to 17% of their combined annual EBITDA – a financial acronym that stands for earnings before interest, taxes, depreciation, and amortization – in a worst-case scenario. That’s according to a note published Friday by S&P Global analysts including Lukas Paul.

GM, Stellantis Could Lose The Most From US Tariffs On Mexico

The proposed tariffs would be especially painful for GM and Stellantis, which depend heavily on Mexican manufacturing for key models, S&P Global Ratings said.

GM, for example, builds eight vehicle lines in Mexico, including the Silverado and Sierra pickup trucks — some of its most profitable products, the analysts said. Stellantis , meanwhile, relies on its Mexican operations for the Jeep Compass and Ram truck models.

For GM and Stellantis, the percentage of EBITDA at risk would be above 20%,Paul said.

Ford's exposure to Mexican tariffs is lower given its more modest footprint there, producing three models: the Bronco, Maverick and Mustang Mach-E.

All three automakers could feel the sting of higher costs and disrupted supply chains.

Tariffs “could have an incremental negative effect on the auto industry, which already faces pricing pressure from sluggish demand growth, into 2025,” S&P Global wrote.

The report also downplayed the gains from a “reshoring.” Shifting production from Mexico back to the U.S. is an option, but it would come with high costs, the analysts said.

Labor in the U.S. is significantly more expensive, and automakers would have to untangle deeply integrated supply chains that have been built around Mexican facilities. For GM, which assembles some of its highest-margin vehicles south of the border, this would be particularly burdensome.

Read also: Canada Prepares Retaliatory Tariffs After Trump Threats: Analysts Warn Of Further Loonie Weakness

EV Tax Credits Under Fire

The potential tariffs aren't the only challenge on the horizon.

Trump has also suggested revisiting the Inflation Reduction Act (IRA), including the possibility of repealing the $7,500 tax credit for qualifying battery electric vehicles and plug-in hybrids.

For automakers like Ford and GM, which are investing heavily in electric vehicles, this could be another blow to their bottom lines.

The IRA credit has been a key incentive driving consumer adoption of electric vehicles, particularly as prices remain high relative to internal combustion engine vehicles.

A rollback could dampen EV sales just as automakers ramp up production in response to rising competition from Tesla Inc. and Chinese automakers like BYD.

Could Tariffs Raise Risks For Credit Downgrades?

“If the tariffs materialize as outlined, the rating impact would depend on the current rating headroom and the success of mitigation strategies,” S&P Global stated.

Yet, while the proposed tariffs alone are unlikely to trigger credit rating downgrades, they compound an already challenging environment for U.S. automakers.

Sluggish demand, tougher CO2 emissions targets in Europe and growing competition from Chinese automakers are already straining profitability.

Read now:

• US–Mexico Trade Tensions Escalate As Mexican Peso Hits August 2022 Lows: Why Is Auto Industry Most At Risk?

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

While many shoppers are searching for the latest tech gadgets, a toy brand nearly 100 years old is dominating Black Friday searches in 2024.

What Happened: Each year, new toys and gadgets are among the most searched items during the Christmas holiday shopping season.

Airpods, iPads, Nintendo Switch, and other newer tech products rank well in searches, but Lego dominates the search results on Black Friday.

The toy brand, which was founded in 1932, ranks first among Black Friday searches according to data from Similarweb, tracking searches on Amazon.com Inc , Best Buy Co Inc , Target Corp , and Walmart Inc .

For searches on Walmart, Lego ranks second trailing only the generic search item of TV. On Target, Lego ranks third, trailing only Pokemon and Pokemon cards.

Read Also: Lego Maker Pledges To Cut Oil Content In Bricks By 2032, Faces Higher Production Costs

Why It's Important: Lego has been a staple among toy wish lists for children and adults alike for many Christmases.

While Lego has advanced its technology and now has motorized sets and sets that focus on STEM (science, technology, engineering and mathematics), sets based on popular movies and television shows are also highly coveted by collectors.

Lego ranking well among searches could be good news for retailers as the items are not exclusive and are sold in many locations.

Lego sets are also not often discounted, which could be good news for retailers and their margins. Many other top products also get heavy discounts for the holiday shopping season to attract retailers.

Read Next:

• Lego Billionaires’ Wealth Surges As Investment Portfolio Turns Profitable

Image created using artificial intelligence via Midjourney.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Consumer stocks rose in late morning trading with the Consumer Staples Select Sector SPDR Fund (XLP) up 0.2% and the Consumer Discretionary Select Sector SPDR Fund (XLY) adding 0.6%.

In sector news, online spending on Thanksgiving rose in line with expectations, reaching $6.1 billion, according to Adobe Analytics' holiday shopping data.

In corporate news, Tesla is likely to unlock $1 trillion worth of artificial intelligence and autonomous opportunity on prospects during President-elect Donald Trump's administration, Wedbush said. Tesla shares rose 1.8%.

Elon Musk, the entrepreneur behind Tesla , SpaceX, Neuralink, and The Boring Company, once shared a piece of advice that offers a window into his relentless pursuit of improvement: “Pay attention to negative feedback and solicit it, particularly from friends. Hardly anyone does that, and it’s incredibly helpful.” This simple yet profound philosophy highlights how constructive criticism can be a powerful tool for personal and professional growth—one that Musk has embraced throughout his career.

Feedback as a Catalyst for Success

In a world where praise often takes center stage, Musk’s insistence on seeking out negative feedback sets him apart. Rather than viewing criticism as a threat, Musk treats it as an opportunity to identify weaknesses and improve. This mindset has been integral to the success of his ventures, which often operate at the cutting edge of technology.

At Tesla, for example, feedback from customers and employees has played a pivotal role in refining the company’s electric vehicles. Musk has been known to personally respond to customer concerns, whether they involve issues with software updates, charging infrastructure, or vehicle performance. By actively listening to criticism, Tesla has been able to address pain points and deliver products that continue to set new standards in the automotive industry.

SpaceX: Learning Through Failure

Musk’s approach to feedback is perhaps most evident at SpaceX, where failure is treated as a learning experience. The company’s early rocket launches were plagued with setbacks, including multiple failed attempts to reach orbit. However, rather than being discouraged, Musk and his team analyzed the feedback from each failure to refine their designs and processes.

This iterative approach to problem-solving has led to groundbreaking achievements, such as the development of reusable rockets and the successful launch of the Crew Dragon spacecraft. By paying close attention to what went wrong, SpaceX has been able to push the boundaries of space exploration and set the stage for missions to Mars.

A Culture of Open Communication

Musk’s emphasis on soliciting feedback extends to the internal culture of his companies. He encourages employees to speak up, challenge ideas, and share their perspectives—even if it means pointing out flaws in his own plans. This openness fosters an environment of innovation and accountability, where problems are addressed head-on rather than ignored.

At Neuralink, for instance, Musk has emphasized the importance of transparency and collaboration as the team tackles the complex challenge of brain-machine interfaces. By encouraging honest feedback, Neuralink is able to refine its technology and move closer to its goal of revolutionizing how humans interact with machines.

Why Negative Feedback Matters

Musk’s advice to solicit negative feedback, particularly from friends, is rooted in the idea that honest critique is often more valuable than praise. While compliments can boost confidence, criticism highlights areas for improvement. Seeking feedback from trusted friends and colleagues adds another layer of insight, as they are more likely to provide candid and thoughtful responses.

This practice is rare because many people shy away from criticism, fearing that it will hurt their confidence or reputation. Musk’s willingness to embrace it demonstrates a unique resilience and a focus on long-term growth over short-term comfort.

Lessons for Entrepreneurs and Innovators

Musk’s feedback philosophy offers valuable lessons for anyone seeking to improve:

• Seek Out Criticism: Don’t wait for feedback to come to you—actively ask for it, especially from people whose opinions you trust.
• Separate Ego from Improvement: View criticism as an opportunity, not a personal attack.
• Act on Feedback: Use the insights you gain to make tangible changes and improvements.
• Encourage Open Dialogue: Create a culture where constructive criticism is welcomed and valued.

Building a Legacy of Excellence

Musk’s focus on feedback has not only shaped his companies but also set an example for how leaders can foster continuous improvement. By paying attention to negative feedback and acting on it, Musk has demonstrated that no idea, product, or individual is ever truly finished—they can always be better.

The Power of Listening

Ultimately, Musk’s philosophy underscores the importance of listening. Whether it’s feedback from customers, employees, or friends, the willingness to hear and act on criticism is what separates those who stagnate from those who grow. For Musk, every piece of negative feedback is a stepping stone toward excellence—a reminder that innovation thrives not on perfection, but on the constant pursuit of improvement.

On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

• Elon Musk Says Negative Feedback is Powerful, 'Hardly Anyone Does That, and It’s Incredibly Helpful'
• Palo Alto Networks Delivers Huge Free Cash Flow Margins and Stock Split
• Tesla is Disrupting The Automobile like Cars Disrupted Horses, Says Elon Musk, "When Henry Ford Made Cheap, Reliable Cars, People Said, ‘Nah, What’s Wrong With a Horse?'"
• Elon Musk Says To Find a Reason To Look Forward to Tomorrow, "There Have to Be Reasons That You Get Up in the Morning and You Want to Live, What Do You Love About the Future?"