Takeaways
- Ford shares fell after the automaker reinstated its 2023 guidance, which it previously withdrew during the United Auto Workers (UAW) strike.
- L& #39;company reached an agreement with the union that included significant wage increases, which Ford estimates will increase costs by $8.8 billion over the life of the contract.
- The automaker Automotive said it will “endeavour to offset” the costs. employment contract costs through “higher productivity and reduced expenses”.
Shares of Ford (F) fell more than 1% in early trading Thursday after the company reinstated its 2023 guidance.
The company previously withdrew its full-year 2023 guidance in its third-quarter earnings report , citing uncertainty surrounding the impact of the United Auto Workers (UAW) union strike against Detroit's Big Three automakers, Ford and General Motors (GM). , and Stellantis (STLA).
Chief Financial Officer (CFO) John Lawler said Ford now expects full-year 2023 adjusted earnings before interest and tax (EBIT) to be between 10 and 10, $5 billion, which represents $1.7 billion in strike losses. In its second-quarter earnings report, before the UAW strike began, Ford had forecast adjusted EBIT of $11 billion to $12 billion.
The agreement Ford with the UAW also planned substantial wage increases that would increase its costs. The automaker said the expected cost of the UAW deal, which ends in 2028, is $8.8 billion.
Lawler said the cost effect “will be about $900 per vehicle by 2028, “which Ford will seek to offset through higher productivity and lower expenses.”
GM reinstated its guidance for 2023 and earlier Wednesday and announced a $10 billion stock buyback as well as a 33% dividend increase.
With that of Thursday falling, Ford shares have fallen more than 10% since the start of the year.
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Source: investopedia.com