Ford takes $1.7 billion profit hit from UAW strike

[November 30, 2023]  (Reuters) -Ford Motor on Thursday said the U.S. auto workers' strike has led to a $1.7 billion hit to its profit and lost production of thousands of vehicles, as it cut its full-year earnings forecast to account for the recently struck labor deal.

The automaker now expects adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion for 2023. In July, it forecast adjusted EBIT of $11 billion to $12 billion.

Ford said the new outlook included $1.6 billion in lost profits in the fourth quarter due to interruptions in production of high-margin trucks and SUVs.

Shares of the company were up 1.9% in premarket trading.

Ford's outlook comes a day after GM cut its 2023 profit forecast and said its new labor deals with the UAW and Canadian union Unifor will cost it $9.3 billion through 2028

Ford was the first of Detroit's Big Three automakers to reach a tentative deal with UAW after nearly six weeks of strikes that saw about 45,000 workers stage a walkout and join picket lines across the United States, demanding better wages and benefits.

The UAW's bargaining with the automakers became a social media spectacle as union chief Shawn Fain livestreamed progress or deadlocks in negotiations to the world often on Fridays, and announced surprise walkouts, while accusing the companies of enjoying record profits without sharing them fairly with workers.

A month into the strikes, Ford said the company was "at the limit" of what it could spend on higher wages and benefits. It warned that the strikes, especially at its most lucrative factory, could slash profits, hurt its ability to invest in the business and harm workers.

Days later Executive Chairman Bill Ford called for an end to the "acrimonious round of talks" and urged UAW to accept a new agreement.

Striking United Auto Workers members hold strike signs outside the Ford Motor Michigan Assembly Plant in Wayne, Michigan U.S., September 17, 2023. REUTERS/Rebecca Cook/File Photo

But Fain's persistence forced Ford to up its offer. The deal UAW leaders finally approved included a pay hike of at least 30% for full-time workers and more than double pay for others.

The new deal also included $8.1 billion in manufacturing investments, removed cost-saving provisions such as paying workers at component plants less than those at vehicle assembly plants, and eliminated all lower wage tier plants.

But the deal led Ford, faced with higher labor costs like its peers GM and Chrysler-parent Stellantis, to pull its 2023 forecast.

Already grappling with losses at its EV business, softening consumer demand amid higher interest rates, and a price war sparked by market leader Tesla, Ford also said it would slash future EV investment plans by $12 billion.

Even as it restarted construction of an EV battery plant in Michigan last week after a two-month pause, Ford said it would reduce capital investment, capacity and the number of jobs planned, without giving an exact figure.

GM also outlined $10 billion in share buybacks, a 33% dividend increase and substantial spending cuts at its troubled Cruise robototaxi unit.

(Reporting by Nathan Gomes in Bengaluru; Editing by Anil D'Silva)

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