Ford Warns Parts Shortages, Higher Supplier Costs Are Expected to Affect Earnings
Auto maker predicts 40,000 to 45,000 unfinished vehicles in inventory at quarter’s end
Ford Motor Co. F 1.43% on Monday warned third-quarter earnings would be affected by about $1 billion in higher-than-anticipated supplier costs and parts shortages that have led to unfinished vehicles it couldn’t sell during the period.
The Dearborn, Mich., auto maker reaffirmed its year-end guidance for 2022, projecting adjusted operating results for the third quarter would fall between $1.4 billion and $1.7 billion.
Ford’s stock was down nearly 5% in after-hours trading.
Ford said it expects to have about 40,000 to 45,000 vehicles in inventory at the end of the quarter that are awaiting parts and can’t be delivered to dealerships—a figure that is higher than expected. Those vehicles, many of them higher-margin trucks and SUVs, are expected to be completed and sold in the fourth quarter, the company said.
Additionally, based on recent negotiations with suppliers, Ford said it is paying more for parts and materials to account for the effects of inflation. The higher payments added about $1 billion in unexpected costs in the third quarter, the company said. Ford said in July it was facing inflationary pressures that would affect a range of costs, totaling about $3 billion for the year.
Ford has previously guided to adjusted earnings before interest and taxes of between $11.5 billion and $12.5 billion for full year 2022.
The company’s notice is another indication that the supply-chain disruptions that have hindered the industry for more than a year now are continuing to weigh on auto-sector earnings.
Other car companies are also struggling to restock dealerships, citing shortages of semiconductors and other critical parts that are needed to assemble cars and trucks.
General Motors Co. said this summer it was unable to deliver nearly 100,000 vehicles to dealers due to parts shortages, including a lack of computer chips. GM posted a 40% decline in net income in the second quarter, hurt by a loss in China, as well as continued supply-chain snarls.
Ford’s sales growth has outpaced competitors in recent months, mostly because its dealership inventory had been depleted in the prior year due to a factory fire in Japan at a critical computer-chip maker. Ford’s U.S. sales rose 27% in August, in contrast to a 5% decline for the broader auto industry.
Inflationary pressures have pushed up raw-material costs, and Ford has raised sticker prices on some popular models, such as the electric Mustang Mach-E SUV and F-150 Lightning truck.
Ford’s earnings have been helped by buyers willing to pay record prices for new vehicles because of limited car and truck availability. In the second quarter, the auto maker’s net income rose nearly 19% over the same-year period.