Ford stock slumps 10% over chip shortage, drags down rival GM, suppliers

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Shares of US carmaker Ford Motor Co fell more than 10% on Thursday after warning that the global shortage of semiconductor chips could halve vehicle production in the second quarter, signaling a poor outlook for rivals and key suppliers.

Analysts said the chip shortage is getting worse as Ford also lowered its earnings before interest and tax outlook for the full year, even after it handily beat Wall Street’s first-quarter earnings estimate, aided by price increases.

“Ford joins a growing chorus and says the semiconductor problem won’t be solved until 2022,” RBC Capital Markets analyst Joseph Spak wrote in a note.

The shortage of chips has forced US automakers to cut production of less profitable vehicles, while allowing them to increase prices for their most profitable vehicles as demand increases, making up for lost production.

Analysts say the trend will not last long and prices will fall later in the year as the supply of chips becomes normal.

Shares of Ford’s larger rival General Motors Co also fell more than 4% on Thursday.

Ford’s lower second-quarter production is likely to weigh on vendors such as Visteon, BorgWarner, Tenneco, Lear Corp, Adient Plc, RBC’s Spak said.

Shares of the suppliers fell between 1% and 5% during morning trading.

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“While we believe Ford has every opportunity to pursue a path that could reach our $ 18 bullcase valuation, we remain ‘underweight’ at this point given our deep concern about the expectations of the auto industry at large Morgan Stanley analyst Adam Jonas wrote in a note.

Ford’s stock fell a whopping 10.4% to $ 11.14, posting their biggest one-day loss in more than 10 months. Ford’s stock is still up about 30% this year.