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.
Ford has placed 40,000-45,000 SUVs and trucks with high margins and high demand at the end the third quarter. This is due to shortages of parts needed to finish the vehicle and then sell it to dealers.
Ford indicated that parts are more costly because of rampant inflation in Monday’s earlier announcement.
They are expected to be in stock by dealers during 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.
Ford still expects that its EBIT for full-year 2022 will be $11.5 billion to $2.5 billion, in spite of the dire news.
Ford’s announcement is a likely indicator that “auto parts shortages and supply-chain issues are still ongoing,”Garrett Nelson, CFRA analyst 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 informed investors that all of the vehicles will be sold to dealers by 2022.
The problem is not specific to Ford, but it remains to be determined if the problem is industry-wide.
GM and Tesla’s stock dropped on Tuesday as well.
According to Friday’s Federal Reserve Bank of Philadelphia data, the manufacturing sector in the mid-Atlantic area unexpectedly declined further in July. Future activity is now at its lowest level since 1979. https://t.co/aQboZbhBWi
— Breitbart News (@BreitbartNews) July 21, 2022
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 per cent believe that there will be an improvement by the end of this year.
Over three quarters of respondents also stated that rising raw materials costs as a result of inflation was a major business problem.
Follow Ethan Letkeman via Twitter @EthanLetkeman.
Check out the complete article here