Auto manufacturer Ford saw it stock shares crash after the company announced a cost increase in the current quarter due to inflation.
The market reacted violently to the news, with the company’s stock falling from around $14.94 per share to trade at $13.54 as of Sept. 20, 11:19 EDT, which is a decline of 9.37 percent. Stock prices were also affected by lower expected earnings.
According to the company, adjusted earnings before interest and taxes (EBIT) for the third quarter is expected to be between $1.4 and $1.7 billion. This is far below the $3.7 billion in EBIT the company reported last quarter. Third-quarter results are due in October.
Inflation Impact on Car IndustryInflation is weighing down on the car industry, with executives predicting declining sales. Last month, BMW CEO Oliver Zipse said during an earnings call that “new incoming orders are falling,” according to Reuters.
Earlier, Volkswagen’s chief financial officer, Arno Antlitz, said that the demand is coming down and that the warning signs are evident in North America and Europe.
Until recent months, carmakers were able to protect their margins in the face of rising input costs by raising prices. But with inflation becoming a major financial strain on household budgets, car manufacturers are no longer in a position to pass on the rising costs.
“There’s still a lot of inflation bubbling up in the new vehicle supply chain. Even though raw material costs are falling, suppliers have a lot of other higher non-commodity costs—diesel, freight, shipping, logistics, labor, electricity—to pass on to automakers,” Brinkman said.