Ford shares fall more than 4% as supply costs rise by $1 billion, parts shortages leave more cars unfinished

Ford Motor Co. shares fell more than 4% in the extended session Monday after the company said inflation and parts shortages will leave it with more unfinished vehicles than it had expected, a reminder that supply chain problems on Wall Street far from is over for car manufacturers.

Ford F,
said it expects to have between 40,000 and 45,000 vehicles in inventory by the end of the third quarter “that are currently missing certain parts.”

The automaker also said that based on the latest negotiations, payments to suppliers will run about $1[ads1] billion higher than expected for the quarter, thanks to inflation. However, the company confirmed its outlook for the year.

Ford’s warning “is evidence that auto parts shortages and supply chain issues are still ongoing,” CFRA analyst Garrett Nelson told MarketWatch.

Many investors had begun to believe that “these problems were in the rearview mirror with inventories starting to recover from record lows in the last year or so,” Nelson said.

The unfinished vehicles include high-demand, high-margin models of popular trucks and SUVs, Ford said. This will lead to some shipments and income being moved to the fourth quarter.

“Ironically, Ford may have become a victim of its own success in that recent U.S. sales growth has outpaced its peers by a wide margin,” Nelson said. Production in the third quarter “was clearly unable to keep up with demand.”

Ford reiterated expectations for 2022 adjusted earnings before interest and taxes of between $11.5 billion and $12.5 billion, despite the shortfall and higher payments to suppliers, it said.

Ford called for third-quarter adjusted EBIT of between $1.4 billion and $1.7 billion.

Shares in Ford ended the regular trading day up 1.4%. The company has begun a reorganization to turn to electric vehicles, and last month confirmed layoffs related to the new structure.

Ford is scheduled to report third-quarter financial results on Oct. 26, when it said it expects to “provide more dimension on full-year earnings expectations.”

Analysts polled by FactSet expect the automaker to report adjusted earnings of 51 cents per share, which would match adjusted EPS for the third quarter of 2021, on revenue of $38.8 billion.

The quarterly sales will be compared with 35.7 billion dollars in turnover in the same period the previous year.

Ford shares fell 4.4% after hours, and have lost 28% so far this year, compared with an 18% loss for the S&P 500 index SPX,

The news comes a week after FedEx Corp. FDX,
roiled markets and raised fears of an economic downturn by withdrawing its outlook for the year and warning that the year was likely to be worse for business.

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