GM, Ford Face Billions in Losses From Historic Car-Price Drop

General Motors Co. and Ford Motor Co.’s finance arms likely face multibillion-dollar losses linked to the dramatic drop in used-vehicle prices, JPMorgan Chase & Co. analysts said.

Manheim, North America’s largest auto-auction company, for the first time ever released a mid-month view of its closely watched used vehicle value index last week, citing the level of “turbulence” in the auto market. Wholesale prices plunged 11.8% in the first 15 days of April, a decline that will easily set a record if it holds for the full month.

The index reading suggests prices are falling faster and steeper than JPMorgan was expecting, lead analyst Ryan Brinkman wrote in a report Monday. Earlier this month, he predicted a 15% drop within months.

“The real losers of the development are likely the captive-finance subsidiaries of automakers like GM and Ford, and the rental-car companies,” Brinkman wrote. If prices finish the second quarter 10% lower than envisioned, he estimates losses could total $3 billion at GM Financial and $2.8 billion at Ford Credit.

Prices are likely going to come under significant pressure in the coming months as rental-car firms including Hertz Global Holdings Inc. and Avis Budget Group Inc. offload far more vehicles than usual to adjust to lower demand and raise capital, Brinkman said.