Ford has faced a significant setback as it reported a loss of $1.7 billion in profits following a six-week United Auto Workers (UAW) strike that resulted in a decline in sales by approximately 100,000 vehicles.
The strike, which started on September 15 and concluded on October 25, impacted Ford's production of high-profit trucks and SUVs, leading to the closure of its largest and most lucrative factory in Louisville, Kentucky.
The logo of US carmaker Ford can be seen on the rim of a Ford car at the International Motor Show (IAA) Germany, on September 8, 2021 in Munich, southern Germany. - Germany's revamped IAA auto show, one of the world's largest, is celebrating all things car-related, but climate concerns and pandemic woes threaten to spoil the party.
UAW Strike After-Effects on Ford
Ford Chief Financial Officer John Lawler acknowledged the adverse effects of the strike, saying that additional labor costs associated with the four-year and eight-month agreement would amount to $8.8 billion by the end of the contract.
That translates to roughly $900 per vehicle by 2028. Despite the challenges, Lawler expressed Ford's commitment to offsetting these costs through increased productivity and expense reduction.
The strike notably impacted Ford's financial outlook, prompting the company to revise its full-year earnings guidance for 2023. While the automaker reissued its guidance, it adjusted its expectations, anticipating earnings of $10 billion to $10.5 billion before taxes in 2023, down from the earlier projection of $11 billion to $12 billion.
The disruptions caused by the strike resulted in the loss of production for Ford's high-margin trucks and SUVs, leading to lower-than-planned vehicle wholesales by approximately 100,000 units.
That, in turn, contributed to the $1.7 billion in strike-related lost profits, with $1.6 billion attributed to the fourth quarter. Despite these challenges, Ford remains optimistic about its long-term strategy, emphasizing the Ford+ plan to position itself at the forefront of the evolving automotive industry.
Banking on Ford+
Lawler emphasized the importance of Ford+ in navigating the ongoing technological transformation, stating that the strategy is designed to make Ford a thriving player in an industry undergoing significant changes.
"This industry is going through the biggest technology-led transformation we've ever seen and some companies, new and old, are going to be left behind," Lawler said in a statement.
"Ford+ is the right strategy to win - we've got a highly talented team that allocates capital with great discipline, so that we're executing with consistency, generating strong growth and profitability, and are less cyclical," he added.
While the new US labor agreement with the UAW is expected to incur significant costs of $8.8 billion over the contract's duration, Lawler reiterated Ford's determination to work towards offsetting these costs.
The CFO noted that the anticipated cost effect would be around $900 per vehicle by 2028, constituting approximately 60 to 70 basis points of adjusted EBIT margin.
Ford plans to release its fourth-quarter and full-year 2023 financial results, along with initial guidance for full-year 2024, after the close of business on February 6.
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