Autoworkers Strike Cost Ford $1.7B in Profits
DETROIT – A six-week United Auto Workers strike at Ford has led to a significant loss in profits for the automaker. Ford announced on Thursday that the strike resulted in a sales reduction of approximately 100,000 vehicles and a loss of $1.7 billion in profits this year.
The strike also comes with additional labor costs from a four-year and eight-month agreement, which Ford estimates will reach $8.8 billion by the end of the contract. This translates to around $900 per vehicle by 2028. To counter these costs, Ford plans to focus on enhancing productivity and reducing expenses.
The strike mainly impacted the production of high-profit trucks and SUVs. The UAW workers’ shutdown of Ford’s largest and most lucrative factory in Louisville, Kentucky, halted the manufacturing of big SUVs and heavy-duty pickup trucks.
Despite re-issuing its full-year earnings guidance, Ford has slightly adjusted its expectations. The company now anticipates earning $10 billion to $10.5 billion before taxes in 2023, down from the $11 billion to $12 billion projection made last summer.
Ford generated $4.9 billion in net income and $9.4 billion in pretax earnings during the first nine months of this year.
Chief Financial Officer John Lawler stated that the company remains devoted to its strategy of disciplined capital allocation to achieve robust growth and profitability.
Following the announcement, Ford’s shares rose by 1.1% to $10.71 in pre-market trading, although they have experienced a decline of more than 20% over the past year.
Ford is scheduled to release its fourth-quarter and full-year financial results on February 6.
Ford, along with General Motors and Jeep maker Stellantis, has reached new contracts with the UAW that include a 33% pay raise for top assembly plant workers by 2028. The contracts also eliminate some lower wage tiers, provide raises for temporary workers, and shorten the time it takes for full-time workers to reach the top pay scale.
UAW President Shawn Fain argued during the strike that labor costs account for only 4% to 5% of a vehicle’s total costs, suggesting that the companies have the financial capacity to pay workers more.
The strike by the UAW began on September 15 and targeted assembly plants and other facilities at Ford, General Motors, and Stellantis. The strike concluded at Ford on October 25.
The impact of the strike on Ford’s profits highlights the challenges faced by the auto industry, as labor disputes continue to impact production and overall financial performance.
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