A six-week United Auto Workers strike at Ford minimize gross sales by about 100,000 automobiles and value the corporate $1.7 billion in misplaced earnings this yr, the automaker mentioned Thursday.
Further labor prices from the four-year and eight-month settlement will whole $8.8 billion by the tip of the contract, translating to about $900 per automobile by 2028, Chief Monetary Officer John Lawler mentioned in an organization release. Ford will work to offset that price by greater productiveness and decreasing bills, Lawler mentioned.
The Dearborn, Michigan, automaker re-issued full-year earnings steerage that was withdrawn in the course of the strike, nevertheless it trimmed its expectations. The corporate now expects to earn $10 billion to $10.5 billion earlier than taxes in 2023. That’s down from $11 billion to $12 billion that it projected final summer season.
Ford mentioned the strike induced it to lose manufacturing of high-profit vehicles and SUVs. UAW employees shut down the corporate’s largest and most profitable factory in Louisville, Kentucky, which makes massive SUVs and heavy-duty pickup vehicles.
The UAW strike started Sept. 15, focusing on meeting crops and different services at Ford, General Motors and Jeep maker Stellantis. The strike ended at Ford on Oct. 25.
Shares of Ford fell virtually 3% to $10.29 in noon buying and selling Thursday. They’re down greater than 25% previously yr.
Ford, in addition to GM and Stellantis, agreed to new contracts with the UAW that increase high meeting plant employee pay by about 33% by the point the offers expire in April of 2028. The brand new contracts additionally ended some decrease tiers of wages, gave raises to short-term employees and shortened the time it takes for full-time employees to get to the highest of the pay scale.
On the finish of the contract, top-scale meeting employees will make about $42 per hour, plus they’ll get annual profit-sharing checks.
UAW President Shawn Fain said during the strike that labor prices are solely 4% to five% of a automobile’s prices, and that the businesses had been making billions and will afford to pay employees extra.
On the Barclays World Automotive and Mobility Expertise Convention Thursday in New York, Lawler was requested about whether or not Ford would think about one thing like GM’s $10 billion inventory buyback program, which the corporate introduced Wednesday.
Lawler mentioned Ford plans to return 40% to 50% of its free money movement to shareholders, on high of the present 15-cent per-share dividend. He mentioned the corporate has religion that executing its plans will enhance the inventory worth.
He additionally mentioned Ford expects costs to fall subsequent yr by about $1,800 for inside combustion automobiles. About $800 of that will come from vendor earnings, whereas Ford would provide $1,000 in reductions, he mentioned.
The corporate, he mentioned, has to concentrate on affordability points for shoppers, who now spend a median of $45,332 on automobiles, in response to J.D. Energy.
Earlier than the coronavirus pandemic in 2019, folks spent about 13.5% of month-to-month disposable revenue on automobiles, Lawler mentioned, however that elevated to fifteen.7% in 2022. It’s since dropped to 14.5%, and Ford expects it to return to pre-pandemic ranges subsequent yr, Lawler mentioned.
Electrical automobile costs, he mentioned, have already got fallen quicker than Ford or different automakers anticipated, so he doesn’t see a lot of a decline subsequent yr. However as individuals who aren’t early adopters begin shopping for EVs, the costs will come down, he mentioned. “They are not willing to pay a premium” over gasoline powered automobiles, he mentioned.
He foresees EV costs being equal to gasoline automobiles and mentioned the corporate is working to scale back EV prices so revenue margins equal gasoline automobiles by 2026 or 2027.
In October Ford introduced it might delay $12 billion worth of EV capital spending as the expansion price for EVs began to sluggish. Lawler mentioned Ford isn’t altering its EV technique, however is altering techniques “so that we can better match (manufacturing) capacity with demand.”
The corporate has cut in half the scale of a Michigan battery factory, delayed a battery plant in Kentucky and minimize manufacturing capability for electrical motors and different elements. “It’s not about not moving forward on our electric plans. It’s about the level of capacity that we’re putting in place.”
