Ford Motor (NYSE: F) shares fell as much as 10.4% 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: GM) boosted its profit expectations last week.
Ford’s dour forecast comes as unsold inventory builds up at automakers and dealers amid a consumer shift to affordable compact vehicles.
The U.S. auto industry is also expected to face further pricing pressures through the remainder of the year as significant U.S. operational errors at Stellantis 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.
Though Ford (NYSE: F) 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.
Ford also said it would intentionally hold extra inventory through the year-end to protect sales during its first-quarter product refreshes, a move that drew skepticism from Barclays analyst Dan Levy.
“It’s understandable why Ford management is motivated to tread carefully around how it addresses inventory from here given the substantial headwinds that STLA has encountered from excess US stock,” Levy said.
Ford 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 (NYSE: F) shares have declined 5.4% this year, giving it a price-to-earnings ratio of about 12, compared with GM’s 5.62.
(Source: Reuters)
