A banner depicting Ford Super Duty pickup truck is pictured outside Ford’s Kentucky truck plant as a United Auto Workers (UAW) union members pickets after going on strike in Louisville, Kentucky, U.S. Oct 12, 2023. REUTERS/Luke Sharrett/File photo
Ford Motor on Thursday pegged the cost of a new labor deal at $8.8 billion and joined rival General Motors in cutting its full-year profit forecast due to lost production from a lengthy strike at its U.S. plants.
The deal with the United Auto Workers (UAW) union, reached after weeks of tense negotiations, will add about $900 in labor costs per vehicle by 2028. Ford said it would work to offset that by cutting costs elsewhere.
The automaker now expects adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion for 2023, down from its prior forecast of $11 billion to $12 billion offered in July.
“At first glance, the reinstated guide looks encouraging,” Citi analyst Itay Michaeli wrote in a note. Shares of Ford fell 1.4 percent in early trading, reversing premarket gains.
The forecast includes $1.7 billion in lost profits from the strike, which Ford also estimated led to about 100,000 units fewer wholesale vehicle sales.
Ford‘s outlook comes a day after GM said its new labor deals with the UAW and Canadian union Unifor will cost it $9.3 billion through 2028. GM also announced $10 billion in share buybacks and a 33-percent dividend increase to boost its sagging share price.
READ: GM sees $9.3-B hit from labor deals, outlines $10-B buyback
Ford was the first of Detroit’s Big Three automakers to reach a tentative deal with the UAW after nearly six weeks of strikes that saw thousands of workers stage a walkout and join picket lines across the United States, demanding better wages and benefits.
The UAW‘s talks with the automakers became a social media spectacle as union chief Shawn Fain livestreamed the twists and turns in negotiations, while announcing surprise walkouts and accusing the companies of enjoying record profits without sharing them fairly with workers.
A month into the strikes, Ford said the company was “at the limit” of what it could spend on higher wages and benefits. It warned that the strikes, especially at its most profitable factory in Louisville, Kentucky, could eat into earnings, hurt its ability to invest in the business and harm workers.
But Fain’s persistence forced Ford to raise its offer.
The deal UAW leaders finally approved included a pay hike of at least 30 percent for full-time workers and more than double pay for others, $8.1 billion in manufacturing investments, and a host of other benefits for workers.
But uncertainty around the ratification of the deal led Ford, which faces higher labor costs like peers GM and Chrysler-parent Stellantis, to pull its 2023 forecast in October.
READ: UAW’s new deal with Ford includes $8B in manufacturing investments
Already grappling with losses in its EV business due to softening consumer demand, Ford had also said it would slash future EV investment plans by $12 billion.
Dearborn, Michigan-based Ford on Thursday also cut its 2023 adjusted free cash flow forecast to between $5 billion and $5.5 billion, compared with its prior forecast of between $6.5 billion and $7 billion. Its CFO John Lawler is set to speak at a conference later in the day.