Ford Motor Co.
F Expedition Timberline 6328e983bd034

Inflation to Add $1B to Ford’s Q3 Supplier Costs

Sept. 20, 2022
The auto maker also says ongoing parts shortages will push some shipments into the fourth quarter.

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.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas JournalT&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!