Last Tuesday, the shares of Ford Motor Co (NYSE: F) dropped by more than 12%. The carmaker said that inflation affected the projected expenses to $1 billion more than the current quarter and that components shortages had delayed delivery.
The share price finished at $13.09, which signifies that the stock had its highest percentage drop for the session since January 2011.
Following Ford’s preliminary results for the third quarter late on Monday, shares of competitor General Motors Company (GM.N) dropped 5.6%. This occurred as experts speculated that 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 Costated that it anticipated that its costs for commodities would increase by $4 billion for the year.
After several days the shipping business FedEx Corp (FDX.N) retracted its financial prediction due to weakening worldwide demand. Now, a factory in the greater Detroit area has issued a similar warning.
Ford Motor Co Challenges with Inflation
The difficulties that Ford Motor Co is having with inflation and the lackluster demand at FedEx bring to light the predicament that the Federal Reserve finds itself in before the meeting on Wednesday that will determine the bank’s policy.
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 Co predicted that it would be missing parts for 40,000 to 45,000 of its vehicles currently in inventory.
Ford 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 is scheduled to publish its 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 the value of Ford’s shares in 2022 is substantially higher than the decrease in value of the S&P 500 (.SPX), which is 19%.
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