Ford shares fall as supply snags and costs hurt profit forecast

By Nathan Gomes

(Reuters) -Ford Motor shares fell 7.3% on Tuesday after the automaker tempered its full-year profit forecast, blaming supplier disruptions and warranty costs amid a global price war fueled by overcapacity.

It expects 2024 adjusted earnings before interest and taxes (EBIT) of about $10 billion, compared with its earlier projection of $10 billion to $12 billion.

In contrast, Detroit rival General Motors (NYSE:) boosted its profit expectations last week.

Toyota (NYSE:), GM and Ford (NYSE:) all reported weaker sales growth for the third quarter and flagged a consumer shift to affordable compact vehicles.

The U.S. auto industry is also expected to face pricing pressures through the remainder of the year as significant U.S. operational errors at Stellantis (NYSE:) have left the company working to clear its bloated inventories.

“We remain cautious over concerns about a deflationary pricing cycle across the industry,” RBC Capital Markets analyst Tom Narayan said in a note, adding that Ford’s forecast cut was expected and the guidance is now “more realistic”.

Though Ford reported third-quarter profit above estimates, its inventory was higher than its target range, as it ended the quarter with 91 days of gross stock and 68 days of dealer stock, CEO Jim Farley told analysts.

“During the call, we sensed a tactical turn in the focus of management as they try hard to get through the remainder of the year and look towards an increasingly uncertain 2025,” Bernstein analysts said.

Ford warned of inflationary pressures in Turkey, which will increase the cost of Transit vans sold in Europe. It also experienced higher-than-expected warranty costs due to recalls and other fixes.

“Management is hesitant to call an inflection in warranty performance, leading us to suspect minimal improvement in 1H’25,” Deutsche Bank Research analyst Edison Yu said.

Ford shares have declined 5.4% this year, giving it a price-to-earnings ratio of about 12, compared with GM’s 5.62.