Ford Gets Knocked Out with a $1.7 Billion Punch from UAW Strike

Ford's Profit Takes a $1.7 Billion Hit Due to UAW Strike

Nov 30 (ANBLE) – Ford Motor (F.N) on Thursday had to put on its seatbelt and brace for impact as the U.S. auto workers’ strike sent them spiraling towards a $1.7 billion loss in profit. It’s like crashing into a giant pile of dollar bills, except the pile is on fire. Ouch! This strike also caused production of thousands of vehicles to come to a screeching halt, leaving Ford stranded on the side of the profit highway.

In a move that’s sadder than a car with a flat tire, Ford was forced to adjust its full-year earnings forecast to account for the labor deal that was just struck. They now expect adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion for 2023. Back in July, they were feeling more optimistic and forecasted adjusted EBIT of $11 billion to $12 billion. Looks like they hit a speed bump they weren’t expecting.

This new outlook includes a whopping $1.6 billion in lost profits in the fourth quarter alone. Talk about a slippery road to success. These lost profits were a result of the production interruptions of high-margin trucks and SUVs. It’s like their vehicles hit a traffic jam and couldn’t get to the destination of profitability.

But amidst all the financial skids and spins, Ford’s shares still managed to rev up and increase by 1.9% in premarket trading. Perhaps investors are hoping for a fast recovery and a smooth ride ahead. Only time will tell.

Ford’s announcement follows hot on the heels of GM (GM.N) cutting its 2023 profit forecast. Looks like both automakers are hitting some roadblocks. GM is estimating that their new labor deals will cost them a whopping $9.3 billion through 2028. That’s a lot of zeroes! It seems like these labor deals are taking a toll on the industry, turning what was once a scenic drive into a costly detour.

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Ford, being the overachiever of Detroit’s Big Three, was the first to reach a tentative deal with the UAW after nearly six weeks of strikes. The strikes were no ordinary Sunday drive – approximately 45,000 workers staged a walkout and picketed across the United States, demanding better wages and benefits.

This whole bargaining process between the UAW and the automakers turned into a social media spectacle. Union chief Shawn Fain took to livestreaming the progress or deadlocks in negotiations to the world. It was like watching a real-life drama series about cars and contracts. Who knew labor negotiations could be so captivating?

A month into the strikes, Ford hit the brakes and said they were “at the limit” of what they could spend on higher wages and benefits. They warned that the strikes, especially at their most lucrative factory, could send them skidding into reduced profits and harm the workers themselves. It was like watching a car teeter on the edge of a cliff, ready to plummet into the abyss.

But Fain didn’t pump the brakes on his persistence. And it paid off. Ford was forced to up its offer and make some concessions. The deal that was finally approved included a pay hike of at least 30% for full-time workers and more than double pay for others. It was like a pit stop with a very expensive fuel refill.

This new deal also included $8.1 billion in manufacturing investments, removed cost-saving provisions, and eliminated all lower wage tier plants. It was a complete overhaul of their previous agreements, like getting a whole new car with upgraded features and extra legroom.

However, this deal took a toll on Ford’s bottom line. The increased labor costs, along with other challenges like losses in their EV business and a price war sparked by Tesla, forced them to pull their 2023 forecast. It’s like they hit a roadblock right as they were about to hit the accelerator.

But Ford’s not giving up. They might be feeling a little dented, but they’re not out of the race. They recently restarted construction of an EV battery plant in Michigan after a two-month pause. However, they will be reducing capital investment, capacity, and the number of planned jobs. It’s like they took a detour, but they’re still on the road to electric glory.

GM, on the other hand, is making some other moves to navigate this bumpy road. They outlined $10 billion in share buybacks, a 33% dividend increase, and substantial spending cuts at their troubled Cruise robototaxi unit. Looks like they’re trying to steer their way out of the challenges they’re facing. Let’s hope these maneuvers help them get back on track.

So buckle up, folks, because the auto industry is going through some twists and turns. It’s like a rollercoaster ride with unexpected drops and hairpin turns. We’ll just have to hold on tight and see where this wild ride takes us.

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Our Standards: The Thomson ANBLE Trust Principles.

Thanks for joining us on this wild ride through the ups and downs of the auto industry! Remember to fasten your seatbelts, because we’re just getting started. Let us know your thoughts in the comments below. Have you ever witnessed a strike that had such a dramatic impact? Or maybe you have some car-related metaphors to share. We’d love to hear from you!

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