General Motors’ stock closes below IPO price

Rising interest rates, increasing gas prices, and increased uncertainty are wreaking havoc on Wall Street, notably in the auto sector.

General Motors lost $2.73 a share, or 7.8%, to $32.28 a share on Monday. After recovering from bankruptcy in 2009, GM's stock closed below the $33 initial sale price.

On January 4, GM closed at $65.74$, but the market crisis this year has driven the stock down roughly 51% since then.

GM CEO Mary Barra claimed at the company's annual shareholder meeting on Monday that the company is "selling every truck we can build," despite record-high gas prices.

Ford's stock also dropped 94 cents a share, or 7.37 percent, to $11.81 on Monday -- the first day of trade.

Since October 2020, GM's stock closed below the company's post-bankruptcy initial public offering price of $33 for the first time. Moments after the company's annual shareholder meeting, GM's stock closed just below $33 a share from November 2010.

CEO Mary Barra said GM's "clear priority" is to "accelerate our EV plans" in answer to a shareholder inquiry regarding restoring the dividend. The company is investing $35 billion in electric vehicles and driverless vehicles by 2025, with the goal of offering only electric vehicles by 2035.

GM's stock has dropped over 45 percent this year as concerns of a downturn rise and investors wonder if the automaker's best days are over.

Due to supply chain issues, particularly a scarcity of semiconductor chips, GM and other automakers recorded massive profits amid the coronavirus pandemic as strong consumer demand outpaced new vehicle inventories.

Stellantis NV, the parent company of Chrysler, lost 64 cents, or 4.69 percent, to settle at $13 a share. Stellantis had reached a high of $21.76 on January 14 and was down nearly 40% as of Monday's close.

Fears of a recession have been growing, according to Morningstar auto analyst David Whiston, combined with concerns that inflation and high costs will hamper customers' willingness to spend. He claims that higher borrowing rates cause financial concerns for budget-conscious consumers who are considering very expensive autos due to the microprocessor scarcity.

"The more of one’s monthly payment that is going to interest the less that goes to principal, which can eventually mean someone opts out of a SUV and goes to a crossover or sedan," Whiston said.

The consumer price index increased by 8.6% in May, according to a survey released late last week, as costs of everything climbed. The Fed has so far raised interest rates many times in an attempt to lower inflation, but the study shows that this will be more difficult than predicted.

This is terrible news for GM and other automakers since it means that rising costs will eventually eat into their profits. GM and its competitors are already battling with rising material costs and supply chain bottlenecks, especially in the semiconductor industry.