October 6, 2022

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Ford's stock recorded its biggest daily drop since 2011, after a warning of inflation

Ford’s stock recorded its biggest daily drop since 2011, after a warning of inflation

The Ford logo is photographed at the 2019 Frankfurt Motor Show (IAA) in Frankfurt, Germany. Photograph: Wolfgang Rathai/Reuters

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Sept 20 (Reuters) – Ford Motor Company (FN) The stock fell more than 12% Tuesday in its deepest one-day drop in more than a decade after the automaker said inflation-related costs would be $1 billion more than expected in the current quarter and parts shortages delayed deliveries.

The stock closed at $13.09, making its decline in percentage terms the largest since January 2011.

Ford’s preliminary third-quarter results, released late Monday, sent rival General Motors shares (GM.N)It fell 5.6% as analysts said it may take more time for automakers to recover from the chip shortage.

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“It appears that the shortage of chips and components in the industry may improve at a slower pace than expected,” Deutsche Bank analyst Emmanuel Rosner said.

In July, Ford said it expected commodity costs to rise $4 billion for the year. Read more

Major Detroit manufacturer’s warning comes less than a week after FedEx Corp for deliveries (FDX.N) It withdrew its financial forecast due to slowing global demand. Read more

Ford’s inflation problems and weak demand for FedEx highlight the correlation the Federal Reserve finds itself in ahead of the US central bank’s policy-making meeting on Wednesday.

The Federal Reserve is widely expected to raise interest rates by 75 basis points in its battle against decades of high inflation. Its aggressive monetary policy campaign has hit the US stock market in recent weeks, as investors worry that the Fed’s actions could derail the economy.

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Ford has also estimated that it will have 40,000 to 45,000 vehicles in stock that lack parts.

Ford, which is due to report third-quarter results on Oct. 26, confirmed 2022 adjusted earnings before interest and taxes from $11.5 billion to $12.5 billion.

Deutsche Bank’s Rosner said it was not clear whether the supply of chips and parts would return to normal by the end of the year.

Ford stock fell 37% in 2022, well above the S&P 500 (.SPX) 19% decrease.

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Additional reporting by Kanaki Deka in Bengaluru and Noel Randwich in Oakland, California. Editing by Shunak Dasgupta, Richard Chang and David Gregorio

Our criteria: Thomson Reuters Trust Principles.