Ford stock suffers worst day since 2011 after cost warning, shedding $7 billion in market value

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Ford F-150 Lightning at the 2022 New York Auto Show.
Scott Mlyn | CNBC

DETROIT – Ford Motor’s stock suffered its worst day in more than 11 years, after the automaker pre-released part of its third-quarter earnings report and warned investors of $1 billion in unexpected supplier costs.

Shares of Ford closed Tuesday at $13.09 apiece, down by 12.3%. The Detroit automaker lost roughly $7 billion off its market value.

It was also the stock’s worst day on a percentage basis since Jan. 28, 2011, when the automaker’s fourth-quarter earnings disappointed investors and the stock shed 13.4% to close at $16.27 a share, according to data compiled by FactSet.

Ford, after the markets closed Monday, said supply problems have resulted in parts shortages affecting roughly 40,000 to 45,000 vehicles, primarily high-margin trucks and SUVs that haven’t been able to reach dealers.

Despite the problems and extra cost, Ford affirmed its guidance for the year but set expectations for third-quarter adjusted earnings before interest and taxes to be in the range of $1.4 billion to $1.7 billion. That would be significantly below the forecasts of some analysts, who were projecting quarterly profit closer to $3 billion.

Ford cited recent negotiations resulting in inflation-related supplier costs that will run about $1 billion higher than originally expected.

While no major Wall Street analysts downgraded the stock in light of the update, several were caught off guard by Ford’s announcement. Expectations were that supply chain problems were easing. What’s more, Ford had recently been avoiding such problems better than some of its competitors.

Goldman Sachs analyst Mark Delaney said his firm was “surprised by the 3Q pre-announcement given the progress that Ford had previously made on supply chain bottlenecks.”

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BofA Securities analyst John Murphy echoed those feelings in a note to investors Tuesday: “Ultimately, this news is somewhat surprising as broader macro news suggest supply chains have gotten incrementally better over the last few months.”

Several analysts questioned whether this was a Ford-specific problem, or a red flag for additional problems for the automotive industry.

GM CEO Mary Barra on Tuesday told CNBC that the company’s supply chain problems have been easing.

“We are seeing an improved situation,” Barra said. “We keep working, solving issues, looking for efficiencies as a normal course, and we’re going to continue to do that.”

Barra said GM is on track to complete about 95,000 vehicles in its inventory by the end of this year that were manufactured without certain components due to supply chain problems. In July, GM warned investors that supply chain issues would materially affect its second-quarter earnings, while similarly maintaining its guidance for 2022.

Ford said its unfinished vehicles are expected to be completed and sent to dealers in the fourth quarter.

In response to the Tuesday decline, Ford spokesman T.R. Reid said the company continues to deliver on its Ford+ restructuring plan.

“Markets are efficient over time,” he said. “We’ve got a great plan at Ford+ to create value for customers, and investors and other stakeholders over time. It’s our obligation to execute against it and create that opportunity.”

Ford’s stock is down more than 36% year to date but still up about 2% in the last 12 months.

— CNBC’s Christopher Hayes and Michael Bloom contributed to this report.

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