Ford's fundamentals remain strong, despite CEO's recession worries, productions snags

Published Wed, Sep 28 20224:00 PM EDTUpdated Thu, Sep 29 20223:19 PM EDT

The economy faces a heightened risk of a recession, Ford (F) CEO Jim Farley told CNBC on Tuesday, a week after the automaker warned investors of $1 billion in unexpected supplier costs and parts shortages in the third quarter. But the Club is sticking with Ford because we believe it has what it takes to navigate macroeconomic headwinds and supply disruptions. "The risk has gone up for a moderate recession certainly from all the indicators we've seen," Farley said. "For us as a business we see labor inflation, a lot of input costs are going up. We're doing our best to overcome them...and we have a big job to do on costs specific to Ford anyways," he added. The chief executive of Club holding Ford also discussed improvements in its chip shortage, even as he warned the company could face supply chain disruptions through next year. While Ford shares have undoubtedly come under pressure – the stock is down more than 40% year-to-date – the Investing Club is taking a long-term view on our Ford investment and is not shaken by what appear to be short-term constraints. Jim Cramer said Wednesday he won't sell Ford here. "I find this a little absurd, frankly, because there have been problems the whole way around, but what matters is demand. If you sell Ford here, you're selling it at a 5% yield," he added. Earlier in the week, Jim said that investors who don't own any shares of Ford should buy "aggressively" to take advantage of the yield . Ford last week said it anticipates third-quarter adjusted earnings before interest and taxes (EBIT) to be between $1.4 billion and $1.7 billion, well below the $2.99 billion estimate predicted by analysts, even as it reaffirmed a full year operating profit forecast of $11.5 billion to $12.5 billion. The automaker has been working on restructuring company costs to stay ahead of the competition to produce electric vehicles, an area that is expected to increase future operating margins. Supply chain pressure Last week, shares of Ford suffered their worst day in more than 11 years , when the company announced persistent part shortages. In its earnings preview, Ford said it expects to have 40,000 to 45,000 unfinished vehicles by the end of the third quarter that will have to be sold down the line. "I think it's going to take a while – it could easily take through next year, and demand would have to fall way off for us to have