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Ford warns investors of additional US$1 billion in supply chain costs in Q3

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ADVICE – Ford Motor on Monday warned investors that the company expected to incur an additional $1 billion in costs in the third quarter due to inflation and supply chain issues.

Ford said supply issues have resulted in parts shortages affecting between 40,000 and 45,000 vehicles, mostly high-margin trucks and SUVs that cannot reach dealers.

The company expects to complete and deliver the vehicles to dealers in the fourth quarter and is still projecting adjusted earnings before interest and taxes in 2022 of $11.5 billion to $12.5 billion.

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The company’s shares fell about 5% in extended trading following the update.

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

The automaker predicts third-quarter adjusted earnings before interest and taxes will be in the $1.4 billion to $1.7 billion range.

Ford added that executives will “provide additional dimension in expectations for full-year performance” when it reports third-quarter results on October 26.

Automakers have been facing supply chain problems since the coronavirus pandemic brought production to a standstill in early 2020. Demand continues to surge despite problems related to related to the availability of parts, namely semiconductor chips.

Ford’s biggest rival, Synthetic engine, announced similar issues earlier this year. GM on July 1 warn investors supply chain issues will hit its second-quarter earnings, noting that it has about 95,000 vehicles in stock that have been manufactured but are missing some components.

GM at the time also reconfirmed its annual guidance and said it hoped that “essentially all of these vehicles” would be completed and sold to dealers before the end of 2022.

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