Ford shares decrease by 10% following a warning of rising supply costs due to inflation.
Ford Motor Co. shares dropped 10% on Tuesday after the carmaker announced that inflation would cost it $1 billion more than anticipated and that some vehicle deliveries would now take place in the fourth quarter owing to a lack of parts.
According to Wells Fargo analyst Colin Langan, “the inflationary charges are worrying as they could remain into Q4 and 2023.”
Following Ford’s preliminary third-quarter results, shares of rival General Motors Co. fell 3.3% as some analysts predicted that the auto industry’s recovery from semiconductor shortages might take longer than expected.
According to Deutsche Bank analyst Emmanuel Rosner, chip and component shortages “look to be recovering across the sector at a slower pace than anticipated.”
In the early going, shares of electric vehicle manufacturers Tesla Inc. and Rivian Automotive Inc. each fell by roughly 1%.
Additionally, Ford stated on Monday that it will have 40,000 to 45,000 unsold automobiles in its inventory. The corporation had estimated some $3 billion damage from inflationary pressures for the year in July.
Investor concerns that the U.S. Federal Reserve’s rapid increase in interest rates to combat skyrocketing inflation could push the economy into a recession are also a factor in the automaker’s prognosis.
According to Ryan Brinkman of JPMorgan Chase & Co., “greater inflation-related supplier costs seem to have a better possibility of reoccurring in comparison to chip shortages, implying some impact to 2023.”
Ford, which is scheduled to release its third-quarter financial results on October 26, said on Monday that it expects to generate between $11.5 billion and $12.5 billion in adjusted earnings before interest and taxes in 2022.
According to Deutsche Bank’s Rosner, it is uncertain whether chip and part supply will return to normal by the end of the year.
Ford’s shares were trading at $13.52, and if losses continue, the stock may have its worst day since February.
