Ford Motor Company (NYSE:F) announced that inflation-related costs would be $1 billion more than expected in the current quarter and that parts shortages had delayed deliveries. The stock of Ford Motor Co. fell by more than 12% on Tuesday, marking its steepest one-day decline in more than a decade. This occurred after the automaker stated that deliveries would be delayed due to a lack of parts. 

Ford Motor Company Stock Drop

The share price finished at $13.09, which signifies that the stock had its highest percentage drop for the session since January 2011. 

Following the presentation of Ford’s preliminary results for the third quarter late on Monday, shares of competitor General Motors Company dropped by 5.6%. This occurred because experts speculated automakers might take longer to recover from chip shortages. 

“It looks that throughout the industry, chip and component shortages may be improving at a slower pace than anticipated,” said Emmanuel Rosner, an analyst at Deutsche Bank. “This is concerning.” 

In July, Ford Motor Company stated that it anticipated that its costs for commodities would increase by $4 billion for the year. 

The warning from the more incredible Detroit manufacturer comes a little less than a week after the financial estimate for the year was withdrawn by the delivery giant FedEx Corp due to a slowdown in worldwide demand. 

The difficulties that Ford Motor Company is having with inflation and the sluggish demand experienced by FedEx bring to light the predicament in which the Federal Reserve finds itself in advance of the policy-making meeting that will take place on Wednesday. 

To combat the decades-long high level of inflation, the Federal Reserve is widely anticipated to raise interest rates by 75 basis points. In recent weeks, the Fed’s aggressive monetary policy campaign has caused significant damage to the U.S. stock market. Investors have been concerned that the Fed’s actions could stifle economic growth. 

In addition, Ford Motor Company predicted that it would be missing parts for 40,000 to 45,000 of its vehicles currently in inventory. 

Ford Motor Company reaffirmed its prediction for adjusted earnings before interest and taxes for the year 2022, which ranges from $11.5 billion to $12.5 billion. The company will publish results for the third quarter on October 26. 

According to Rosner of Deutsche Bank, it was uncertain whether chip and components supply would return to normal before the end of the year. 

The drop in Ford’s shares in 2022 is substantially more than the decrease in the value of the S&P 500, which is 19%.

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