Ford inventory suffers worst day since 2011 after value warning

Ford F-150 Lightning at the 2022 New York Auto Show.

Scott Mill | CNBC

DETROIT — Ford Motor stock endured its worst day in more than 11 years after the automaker prereleased part of its third-quarter earnings report and warned investors of an unexpected $1 billion in supplier costs.

Shares of Ford closed Tuesday at $13.09 a share, down 12.3%. The Detroit-based automaker lost around $7 billion in market value.

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

After markets closed on Monday, Ford said supply problems have caused parts shortages that are affecting about 40,000 to 45,000 vehicles, mostly high-margin trucks and SUVs, which dealers have been unable to reach.

Despite the struggles and additional costs, Ford confirmed its guidance for the year, but set guidance for third-quarter adjusted earnings before interest and taxes at $1.4 billion to $1.7 billion. That would be well below forecasts by some analysts, who were calling for quarterly earnings closer to $3 billion.

Ford cited recent negotiations that resulted in inflation-related supplier costs that would be about $1 billion higher than originally expected.

Though no major Wall Street analyst downgraded the stock in light of the update, several were surprised by Ford’s announcement. Supply chain problems were expected to ease. In addition, Ford avoids such problems better than some competitors.

Goldman Sachs analyst Mark Delaney said his company was “surprised by the Q3 advance notice given the progress Ford had previously made on supply chain shortages.”

BofA Securities analyst John Murphy echoed those sentiments in a note to investors on Tuesday: “Ultimately, this news comes as a bit of a surprise as broader macro news suggests that supply chains have gradually improved over the past few months.”

Several analysts questioned whether this was a Ford-specific issue or a warning sign of additional problems for the auto industry.

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

“We see an improved situation,” said Barra. “We continue to work, solve problems, look for efficiencies as a normal course, and we will continue to do so.”

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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 issues. In July, GM warned investors that supply chain issues would significantly impact second-quarter earnings while similarly standing by its 2022 guidance.

Ford said its work-in-progress vehicles are expected to be completed and shipped to dealerships in the fourth quarter.

In response to Tuesday’s drop, Ford spokesman TR Reid said the company is continuing to implement its Ford+ restructuring plan.

“Markets are efficient over time,” he said. “We have a great plan at Ford+ to create value for customers, investors and other stakeholders over time. It is our duty to implement it and create this opportunity.”

Ford stock is down more than 36% year-to-date but is still up about 2% over the trailing 12 months.

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