Terrible news emerged for legacy automaker Ford (F), and worst of all, it was the kind of news that it probably could not have prevented if it wanted to. And it almost certainly did want to. A large-scale fire struck at Novelis, which runs an aluminum plant in New York. That plant supplies aluminum sheet to a large part of the auto industry, including Ford. Shareholders got remarkably nervous, and sent Ford shares careening down over 6% in Tuesday afternoon’s trading.
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A report from the Wall Street Journal noted that Novelis supplies about 40% of the United States auto industry’s aluminum sheet. The fire, meanwhile, took out a “major portion” of the Oswego plant’s operations, and will keep them out of the picture until “…early next year.” Perhaps even worse is the revelation that Ford is the “biggest user” of the plant, the report noted, as the F-150 is one of the auto industry’s biggest users of aluminum.
In fact, the report noted, Ford will likely end up declaring this issue as part of its quarterly financial figures, set to come out later this month. While Ford does have several aluminum suppliers alongside Novelis, the loss of Novelis is still going to be substantial and not easily ameliorated, if at all.
Insult to Injury
And the news got worse from there. A new report also emerged saying that Ford was in the process of constructing a new facility at the Oakville Ford Assembly Plant. The plant was designed to build Super Duty pickup trucks in 2026, but with Novelis down for the rest of the year, who knows if Ford will continue building that plant?
It is entirely possible; after all, Ford knows the Novelis plant will be back up and running at the end of this year, and Ford will certainly have some catch-up work to do since one of its key aluminum sheet suppliers is down for the count. But Ford might well reconsider, especially if one product line is temporarily crippled.
Is Ford Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on F stock based on three Buys, eight Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 21.07% rally in its share price over the past year, the average F price target of $11.18 per share implies 6.17% downside risk.
