Ford Offers Updated 2023 Guidance, Will Slash $12 Billion In EV Investments As Result Of UAW Contract

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by Tyler Durden
Thursday, Nov 30, 2023 - 06:05 PM

Weeks after settling labor negotiations with the UAW and hours after General Motors shares skyrocketed after the company hiked its dividend 33% and announced a $10 billion buyback, Ford is also reinstating its 2023 guidance.

In its revised guidance, Ford says it is aiming for adjusted EBIT in the range of $10 billion to $10.5 billion, along with adjusted free cash flow between $5 billion and $5.5 billion, according to CNBC

This guide is a shift from the company's previous projections of adjusted EBIT between $11 billion and $12 billion and adjusted free cash flow of $6.5 billion to $7 billion.

Ford disclosed that its new labor agreement with the UAW is anticipated to have a financial impact of $8.8 billion throughout the contract's duration, which concludes in April 2028. In comparison, General Motors, a rival in the industry, recently reported a $9.3 billion impact resulting from their own labor agreement. 

Before the conclusion of the approximately six-week-long UAW strikes, Ford had been on track to meet its financial projections, CFO John Lawler said during its late October earnings call. 

He had indicated that the UAW strike had already caused a $1.3 billion loss in earnings for the company, primarily due to the disruption in production, resulting in around 80,000 vehicles not being manufactured. Of this amount, approximately $100 million was attributed to the third quarter. Subsequently, the company has updated this figure to $1.7 billion. 

The CNBC report says that Ford also confirmed the UAW agreement is expected to increase costs by approximately $900 per assembled vehicle by 2028.

As a result, Ford "plans to cancel or postpone $12 billion in investments related to electric vehicles," CNBC wrote. In other words, the Biden administration supports labor unions and wants to push for electric vehicles. But the UAW's extortion contract negotiations with Ford have prompted the company to slash $12 billion in EV investments. 

“We’ve got a highly talented team that allocates capital with great discipline, so that we’re executing with consistency, generating strong growth and profitability, and are less cyclical,” Lawler said Thursday. 

Recall yesterday GM said it was launching a swift $10 billion share buyback, according to CNBC. "GM will immediately receive and retire $6.8 billion worth of its common stock," the report said. 

In its 2023 projections, it has also reincorporated expectations, factoring in an anticipated impact of $1.1 billion in EBIT-adjusted earnings due to approximately six weeks of labor strikes by the United Auto Workers union in the U.S.

“The long-term plan we are executing includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing our fixed and variable costs,” CEO Mary Barra said in a statement.