Ford earnings rise despite UAW strike hit
By Chris Isidore, CNN
New York (CNN) — Ford earnings increased in the third quarter, the company reported Thursday, the day after it reached a tentative deal to end a nearly six-week strike by the United Auto Workers union.
The company earned adjusted earnings before interest and taxes, or EBIT, of $2.2 billion, up from $1.8 billion a year earlier. But it still fell short of the $2.6 billion forecast by analysts surveyed by Refinitiv.
Revenue at the company also rose 11% to $43.8 billion.
The company reached a tentative deal with the UAW on Wednesday, setting the stage to end the strike that started September 15. The 16,600 striking workers at Ford are due to return to work soon, though exact timing is dependent on when specific plants can be re-started.
About 45% of the company’s production had been shut as the union had increased the reach of the strike to three of its assembly plants. But when the strike started, only one of its plants had been shut for the final two weeks of the quarter included in Thursday’s report.
Ford CFO John Lawler said the strike reduced EBIT by about $100 million in the just completed third quarter. And it said it likely lost the chance to produce 80,000 vehicles that it had planned to build and sell during the year, which will reduce full-year EBIT by about $1.3 billion. It did withdraw its guidance for the rest of the year due to the uncertainty caused by the strike, even though most workers are close to returning to work, and the broad scope of what the new labor deal will cost can now be estimated. Lawler said there is still uncertainty caused by the strike, including how smoothly the restart of plants will go, and how quickly the company’s suppliers will be back online and able to provide the parts Ford depends upon to build vehicles.
The 57,000 UAW members at Ford will be getting an immediate pay raise of 11% once the deal is ratified, and pay increases totaling 25% during the four-and-half year life of the contract. They’ll also get improved contributions to their retirement accounts and a cost-of-living adjustment to protect them from rising prices.
Profits and revenue were both solidly higher at the company’s core existing business, that of selling gasoline-powered vehicles to consumers. Revenue rose 7% to $25.6 billion, despite the fact that the number of vehicles sold by that unit of the business declined 1% to 736,000. EBIT rose 17% to $1.7 billion.
Its second largest business, selling mostly gasoline-powered commercial vehicles, also enjoyed solid growth, as revenue rose 16% to $13.8 billion, while EBIT there soared 311% to $1.7 billion.
But the losses at the company’s Model e unit, which includes the sales of its electric vehicles, also soared, more than doubling to $1.3 billion, even though the number of EVs sold also increased 44% to 36,000. The losses in its electric vehicle unit were “exacerbated by EV price pressure,” as well as continued investment in next-generation EVs.
“Many North America customers interested in buying EVs are unwilling to pay premiums for them over gas or hybrid vehicles, sharply compressing EV prices and profitability,” said the company’s earnings statement.
Shares of Ford fell 3% in after-hours trading on the earnings miss and the withdrawal of its full-year earnings guidance.
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