Ford Motor Co. executives on Sept. 19 said they will pay suppliers $1 billion more than previously expected during the third quarter after concluding some recent negotiations. The company also is pushing some vehicle deliveries into the fourth quarter because of ongoing parts shortages but its leaders are sticking to their full-year pre-tax earnings forecast.
The inflation update from Michigan-based Ford comes after CEO Jim Farley and CFO John Lawler in July added $1 billion to their forecast for 2022 inflationary factors aside from commodity costs, pushing it to $3 billion. In a short statement Sept. 19, the company did not provide more details about this latest increase.
Shares of Ford (Ticker: F) fell more than 4% in after-hours trading to about $14.25. Over the past six months, they are now down nearly 15%, trimming the company’s market capitalization to about $58 billion.
Despite this latest cost forecast hike, Farley and Lawler affirmed their full-year forecast for adjusted earnings before interest and taxes, which they expect to come in between $11.5 billion and $12.5 billion. For the third quarter, that number is expected to be $1.4 billion to $1.7 billion, up from $1.1 billion in Q2.
On the supply chain front, the Ford team expects to finish the quarter with between 40,000 and 45,000 nearly-finished vehicles—a disproportionate number of them higher-margin trucks and SUVs—awaiting one or more parts. By comparison, that number was 53,000 at the end of the first quarter but had been whittled down to 18,000 by June 30 as Ford secured more semiconductors and other components.
Ford’s warning echoes comments made last week by General Electric Co. CFO Carolina Dybeck Happe, who told attendees of a Morgan Stanley conference that enduring supply chain pressures will delay some deliveries to customers. That will, as with Ford, dent GE’s cash flows during the third quarter.
