FORD REINSTATES 2023 GUIDANCE AFTER UAW NEGOTIATIONS
**Impacts of Labor Strikes and Union Negotiations**
On Thursday, Ford Motor Co. reinstated its 2023 guidance following a month-long period of uncertainty due to labor strikes and negotiations with the United Auto Workers (UAW) union. The reinstated guidance calls for adjusted earnings before interest and taxes (EBIT) between $10 billion and $10.5 billion, as well as adjusted free cash flow ranging from $5 billion to $5.5 billion. This update comes after Ford had previously pulled its forecast due to the impacts of labor strikes and negotiations with the UAW union.
**Financial Impact of UAW Labor Agreement**
Ford announced that the new UAW labor agreement is expected to cost the company $8.8 billion over the life of the contract, which expires in April 2028. This expense is significantly higher than the previously announced guidance of adjusted EBIT between $11 billion and $12 billion and adjusted free cash flow totaling $6.5 billion to $7 billion.
**Previous Expectations**
Before the UAW strikes, which lasted for about six weeks, Ford was optimistic about hitting its guidance, as Chief Financial Officer John Lawler had indicated during the company’s third-quarter earnings report. However, the company had already incurred a significant financial hit due to the strike, costing Ford $1.3 billion in earnings and resulting in the lost production of approximately 80,000 vehicles.
**Future Impact on Vehicle Costs**
Ford confirmed that the UAW deal is expected to add approximately $900 in costs per assembled vehicle by 2028. Despite this, Lawler emphasized the company’s commitment to finding productivity and efficiencies to offset the additional costs and deliver on previously announced profitability targets. Ford also announced plans to cancel or postpone $12 billion in investments related to electric vehicles as part of their cost-saving measures.
**Expectations for the Future**
The company communicated that John Lawler is expected to discuss the reinstated guidance at a Barclays investor conference. Ford’s update comes after General Motors stated its plans to increase its quarterly dividend by 33% and initiate a $10 billion share repurchase program following its own negotiations with the UAW.
**Impacts across the Auto Industry**
Ford’s update regarding the financial impacts of its labor negotiations mirrors similar situations across the auto industry. Both Ford and General Motors have experienced significant adjustments in their financial forecasts as a result of the UAW agreements, including at least 25% hourly pay raises and enhanced profit-sharing payments for employees. Chrysler parent company, Stellantis, which was the second U.S. automaker to reach a deal with the UAW, has not disclosed the expected costs of its labor pact with the union.
I have over 10 years of experience in the cryptocurrency industry and I have been on the list of the top authors on LinkedIn for the past 5 years. I have a wealth of knowledge to share with my readers, and my goal is to help them navigate the ever-changing world of cryptocurrencies.