Aluminum plant fire could shave $800M off Ford's FY25 EBIT -- Wells Fargo

[2017 Ford F-150 Raptor pickup truck car parked outdoor, low view]
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Automakers are scrambling to find alternative sources of aluminum following a fire [https://seekingalpha.com/news/4502198-aluminum-plant-fire-impact-automakers]at an Oswego, New York plant last month which provides as much as 40% of the industry’s aluminum sheet.

Among those expected to be hardest hit is Ford (NYSE:F [https://seekingalpha.com/symbol/F]), whose F-Series pickup — one of the auto industry’s biggest users of aluminum — relies on the metal to cut vehicle weight, boost towing capacity, and reduce corrosion.

Novelis, which owns the factory, is looking overseas for new capacity, but at the risk of facing 50% import tariffs.

While it’s still early to determine the financial impact of the disruption to Ford (NYSE:F [https://seekingalpha.com/symbol/F]), Wells Fargo analyst Colin Langan extrapolates prior production data to conclude that FY25 will take a hit of roughly $800M to EBIT.

This assumes a 20% reduction in fourth quarter F-Series production -- around 46K units -- and reflects a high contribution margin on pickups of roughly $17K per truck.

According to Langan, this would be a “large hit” to FY25 guidance of $6.5B to $7.5B. But on the plus side, pickup loyalty is high, Langan says, “so much of the impact will likely be recouped in FY26.”

Suppliers are also bracing for the potential fallout from F-Series production disruptions, specifically Dana Incorporated (DAN [https://seekingalpha.com/symbol/DAN]), which provides Super Duty axles, Adient plc (ADNT [https://seekingalpha.com/symbol/ADNT]) for the seating, BorgWarner (BWA [https://seekingalpha.com/symbol/BWA]) which provides turbos and transfer cases, Visteon Corp (VC [https://seekingalpha.com/symbol/VC]) for the F-Series clusters, and Lear Corp (LEA [https://seekingalpha.com/symbol/LEA]) which provides the wiring for the trucks.

As Wall Street considers the impact from the fire, the news is reverberating through the auto sector, dragging Ford (NYSE:F [https://seekingalpha.com/symbol/F]) shares down more than 7%, along with sizeable losses for DAN (-3.2%), ADNT (-7.8%), BWA (-5.3%), VC (-3.7%) and LEA (-2.7%).

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