Ford Stock Plummets as Supply Chain, Inflation Woes Cost Company $1 Billion

The Ford Motor Company’s stock plummeted Tuesday after previously announcing supply chain and inflation problems will cost the company $1 billion in the third quarter.

The company’s announcement raises questions about whether industry wide supply chain issues still persist.

Ford’s stock (F: NYSE) on Tuesday opened at $14.11 but dropped to $13.38 an hour later. The Dearborn automaker’s stock closed the day at $13.09.

Supply chain woes have resulted in Ford placing 40,000 to 45,000 high-margin and high-demand trucks and SUVs to be left in inventory at the end of the third quarter due to a supply shortage of proper parts to complete and sell the vehicles to dealers.

Ford also indicated in the earlier Monday announcement that rampant inflation has made it expensive to purchase certain parts.

The company expects the vehicles to be ready to sell to dealers in the fourth quarter.

With the vehicles not ready to sell to the market, Ford adjusted their third-quarter earnings before interest and taxes (EBIT) between $1.4 to $1.7 billion – much lower than Wall Street estimations of $3 billion, according to Yahoo Finance.

Despite the grim news, Ford is still expecting its full-year 2022 EBIT to be between $11.5 billion to $12.5 billion.

Ford’s announcement is a likely indicator that “auto parts shortages and supply-chain issues are still ongoing,” according to CFRA analyst Garrett Nelson via MarketWatch.

Ford’s rival General Motors (GM) faced similar problems in the second quarter, saying in July it had 95,000 vehicles in inventory due to a shortage of components, according to CNBC. GM also told investors that it expects all the vehicles to be ready to sell to dealers at the end of 2022.

It remains to be seen whether it is a Ford-specific problem or an industry-wide problem.

GM and Tesla’s stock dropped on Tuesday as well.

A recent National Association of Manufactures’ 2022 third quarter survey found that 78.3 percent of manufacturing leaders listed supply chain disruptions as the number one vainness challenge. Only 10.8 percent believe there will be an improvement at the end of the year.

More than three-quarters of those surveyed also say rising raw material costs due to inflation were a top business challenge.

You can follow Ethan Letkeman on Twitter at @EthanLetkeman.