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Ford shares new guidance after UAW strike costs it $1.7B

Breana Noble, The Detroit News on

Published in Automotive News

Ford Motor Co. on Thursday said it's anticipating full-year adjusted operating income of $10 billion to $10.5 billion in 2023 that reflects $1.7 billion in lost profits from the United Auto Workers' 41-day strike against it.

The Dearborn automaker had withdrawn its annual guidance last month pending the ratification of a tentative agreement with the Detroit-based union that wrapped up earlier this month. Now that workers have approved the agreement and to make up for expected decreases in electric-vehicle premiums, Ford is looking at cost-cutting measures and improvements to its manufacturing process.

After increasing its guidance following the second quarter from improvements in supply chain, higher volumes, new Super Duty trucks and lower commodity costs, Ford previously said it had expected an adjusted operating income of $11 billion to $12 billion in 2023. Its original guidance was between $9 billion and $11 billion.

"So, if you take that $10.5 (billion), if we hadn't lost that volume due to the strike," Ford Chief Financial Officer John Lawler said Thursday at the Barclays Global Automotive and Mobility Tech Conference, "we would be at the high end of our original guidance of $11 to $12 (billion)."

The UAW employed a simultaneous, targeted "stand-up strike" against the Detroit Three. It interrupted production of high-margin trucks and SUVs, resulting in a loss of about 100,000 vehicles, Ford said. The bulk of the $1.7 billion in lost profits — $1.6 billion — will be reflected in fourth-quarter results to be shared on Feb. 6. That's when Ford will share 2024 guidance, as well.

Full-year 2023 adjusted free cash flow also is expected to be between $5 billion and $5.5 billion. That's down from the previously forecasted $6.5 billion and $7 billion as well as down from Ford's original 2023 guidance of about $6 billion.

 

Ford says its target is a 40% to 50% return to shareholders. What its 15-cent dividend doesn't cover will be issued in the first quarter of next year as a supplemental dividend.

The Blue Oval generated $4.9 billion of net income and $9.4 billion in adjusted operating income through the first three quarters of the year, prior to the full effects of the work stoppage.

In total, Ford said the new UAW contract is expected to cost $8.8 billion over the agreement's four-and-half years. Gross wages that include a 27% general wage increase, a three-year wage progression down from eight years and the returned cost-of-living adjustments account for the largest portion of the costs.

The company anticipates the deal will add about $900 in costs per vehicle by 2028, which is up to 0.7% of adjusted operating income margin. Ford hopes to offset that with lower expenses and improved productivity.

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