In its latest financial update, Ford Motor Company has reissued its 2023 guidance, a month after withdrawing it due to the ongoing labor strikes and negotiations with the United Auto Workers (UAW) union.
The revised forecast addresses the $1.7 billion in lost profits from the strike, which Ford estimates will result in approximately 100,000 fewer wholesale vehicles.
According to the new guidance, Ford anticipates adjusted earnings before interest and taxes (EBIT) in the range of $10 billion to $10.5 billion, along with adjusted free cash flow between $5 billion and $5.5 billion. However, the company also acknowledges that the new UAW labor agreement is expected to carry a substantial cost of $8.8 billion throughout the contract’s duration, set to expire in April 2028.
This agreement is projected to add approximately $900 in labor costs per vehicle by 2028. Ford is committed to identifying cost-cutting measures in other areas to mitigate this increase. One example is a $12 billion scale-back in future electric vehicle (EV) investment plans, prompted by softer consumer demand.
Crosstown rival General Motors (GM) recently disclosed a $9.3 billion impact over the course of its labor agreement with the UAW. GM’s financial assessment also accounts for costs associated with a deal with Canada’s Unifor. To achieve its financial targets, GM plans to curtail capital expenditures, including a slowdown in investments in electric vehicles and its autonomous vehicle subsidiary, Cruise. Cruise faced a recent setback when California regulators revoked its robotaxi license following an incident involving a pedestrian.
Both UAW agreements, involving Ford and GM, stipulate a minimum 25% increase in hourly wages, the reinstatement of cost-of-living adjustments, and improved profit-sharing benefits, among other provisions.
Meanwhile, Chrysler parent company, Stellantis, the second of the “Big Three” U.S. automakers to finalize a labor agreement with the UAW, has not disclosed the anticipated costs associated with its pact with the union.