Ford Motor (FN) sent its shares plunging more than 4% after hours on Thursday, citing “uncertainty” around the ratification of its agreement with the United Auto Workers (UAW) union as the reason for the withdrawal of its full-year results estimate. The firm also issued a warning about ongoing pressure on electric vehicles.
A strike at some of Ford’s largest factories ended on Wednesday when the union and the carmaker negotiated a tentative agreement that included a 25% wage increase for 57,000 workers over 4-1/2 years.
Chief Financial Officer John Lawler of Ford stated during a conference on Thursday that the company anticipates an increase in labor costs per vehicle of $850 to $900 due to the new deal.
In an investor letter on Thursday, CFRA research analyst Garrett Nelson stated that the firm has made some essential compromises. “They will weigh on margins and affect its competitiveness relative to Tesla and other non-union automakers.”
Following rival General Motors (GM.N) decision to delay opening a $4 billion electric truck facility in Michigan earlier this week, Ford has grown increasingly concerned about the slowing market for EVs.
Citing “tremendous downward pressure” on pricing, Lawler restated Ford’s decision to postpone a portion of its planned multibillion-dollar investment in additional EV and battery production capacity.
Compared to its estimated $32,350 loss per EV in the second quarter, Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it supplied to dealers during the quarter.
During Ford’s July second-quarter earnings briefing, Chief Executive Officer Jim Farley stated that the firm would reduce the pace at which it ramps up the production of financially disastrous EVs. Instead, he plans to reallocate investment to Ford’s commercial vehicle unit and triple sales of gas-electric hybrids over the next five years.
Ford is “trying to find the balance between price, margin, and EV demand,” according to Lawler, who stated as much on Thursday as many of its rivals. According to Farley, “affordability is an issue” for customers.
Earlier this week, GM also retracted its prediction for 2023 results and backed down from its frequently stated goal of producing 400,000 electric vehicles by the middle of 2024.
Based on LSEG statistics, Ford’s adjusted third-quarter earnings per share of 39 cents fell short of the Wall Street average expectation of 45 cents.
LSEG data shows that revenue of $41.18 billion, excluding Ford Credit, fell short of Wall Street estimates of $41.22 billion.
According to Ford, its EV division reported a $1.3 billion loss in earnings before interest and taxes, increasing the company’s nine-month EBIT deficit to $3.1 billion. For the Ford Model E unit, the firm had projected a pretax loss of $4.5 billion for the entire year.
According to the automaker, customers were not prepared to pay more for EVs than equivalent combustion and hybrid cars, which claimed that its EV division was seeing “sharply compressed” costs and profits.
Ford had a $1.2 billion profit in the third quarter of this year, up from a $827 million loss the previous year. A $2.7 billion noncash writedown on Ford’s stake in the now-closed Argo driverless car firm was one of the losses from last year.
The carmaker reported more excellent sales, EBIT, and EBIT margins for its Ford Pro commercial vehicle division and its Ford Blue combustion and hybrid vehicle business. Sales of vehicles to dealers in both units decreased from the previous year.
The adjusted free cash flow decreased from $3.6 billion to $1.2 billion in the prior year.
