The disappointing results, which also reflected higher commodity costs, shook confidence in the next stage of recovery for Ford after a four-year comeback that has seen the No. 2 U.S. carmaker climb back from a brush with near-bankruptcy.
Ford shares had been one of the best-performing American stocks since late 2008, rising from just above $1 to nearly $19 earlier this month. The fourth-quarter results marked the first time Ford fell short of Wall Street profit forecasts in two years.
"Anything that comes out that's a tad disappointing, even if it's a tad disappointing inside a great story, is going to be punished," said Bernie McGinn, chief investment officer at McGinn Investment Management, who owns Ford shares.
Ford shares closed down 13 percent at $16.27 n the New York Stock Exchange, where it was the second-most active stock, behind Citigroup.
The decline was the biggest, single-day percentage drop for Ford since May 2009, when investors reacted with alarm to Ford's plan to dilute its outstanding shares by 13 percent with new stock issued to fund retiree healthcare.
Excluding one-time items, Ford posted an operating profit of 30 cents per share for the quarter, well below the 48 cents per share analysts forecast. Net income dropped almost 80 percent from a year earlier to $190 million for the quarter.
Costs shot higher by over $1 billion compared with the third-quarter, equivalent to a hit of about $860 for every car and truck Ford sold in the period.
Morgan Stanley analyst Adam Jonas said the fourth-quarter results provided "no new reason to buy the stock" and could have "negative stock repercussions" for General Motors Co and other auto companies.
GM shares fell more than 5 percent by the close, the biggest drop for Ford's larger rival since its mid-November IPO.
'PRETTY UGLY, ACTUALLY'
"Ford results were pretty ugly, actually, and the company has been adopted by momentum players," said James Daily, portfolio manager of Team Asset Strategy Fund in Harrisburg, Pennsylvania. "When that happens, you need to have the company beat in the quarter and raise its outlook in order to keep moving higher."
Ford Chief Financial Officer Lewis Booth said analysts underestimated the additional cost of launching new vehicles such as the Explorer SUV and new F-Series trucks.
Another negative surprise was the performance of Ford's European operations, which the automaker had projected would be profitable. Instead, Europe posted an operating loss of $51 million.