a worker puts a new part on a ford

Ford Misses Analyst Expectations, Says New UAW Deal Raising Costs

Ford Motor Co. reported it was profitable during the third quarter, unlike last year, but its bottom line is going to be crimped for the next few years. The company’s Q3 revenue was $43.8 billion, up 11% year-over-year – a net income of $1.2 billion reversed last year’s Q3 net loss of $827 million. Adjusted earnings before interest and taxes, or EBIT, for the quarter this year increased to $2.2 billion.

Despite the lack of red ink on its ledger, Ford fell short of Wall Street’s expectations of $11 billion in adjusted earnings and free cash flow of $6.5 billion for the quarter. As a result, the company’s stock fell 4% in after-hours trading. 

“I’m very optimistic about the reality we’re creating with Ford+,” Ford CEO Jim Farley said in a statement. “We’re building a more dynamic, highly talented and customer-focused company at the intersection of great vehicles, iconic brands, innovative software and high-value services.”

“We’re also radically changing how we work with a series of actions that put the right people with the right capabilities in the right places across the organization, so that our promise isn’t masked by cost and quality issues.”

Automakers Express Tempered Optimism

While clearly pleased to be back in the black, some issues linger, primarily the impact of the company’s newly minted labor agreement with the UAW. The two sides finalized the tentative agreement Wednesday evening. 

The contract still needs to be ratified by the union’s rank-and-file, yet that is expected to happen this week, especially considering the fact that UAW Vice President Chuck Browning called it the best contract “since Walter Reuther was president.” The union used a series of “stand-up strikes” to cripple Ford – as well as General Motors and Stellantis – during the talks. The strikes went on for 41 days, costing the automaker $1.3 billion.

Aside from the billion-dollar-plus loss, the 25% wage increase, return of cost-of-living allowances, and other concessions given by Ford, the contract has another impact. Ford CFO John Lawler said the deal could add $850 to $900 per vehicle.

“We’re going to have to find efficiencies and productivity throughout the company to help mitigate the impacts of the higher labor costs,” Lawler said. Will any of that trickle down to the window sticker on your next new Ford? The company is looking to avoid that.

“Downward Pressure” on EV Pricing Creating Delays

During the talks, Ford suggested the new electric vehicle (EV) battery plant planned for Western Michigan may be delayed as the company reassesses how quickly it wants to spend those billions of dollars – or $3.5 billion in the case of the Marshall, Michigan site being developed to produce new chemistry batteries.

a ford EV charger plugged into a vehicle

Lawler said the delays are a result of “tremendous downward pressure” on the price of electric vehicles. At about $49,000, the average price for a new EV is beyond many buyers in the market. Further, Ford is struggling to find a way to make its EVs green – not environmentally, but profitably.

Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers during the third quarter. That’s a bigger loss than the estimated $32,350 loss per EV in the second quarter, Reuters reported.

The automaker is quickly confirming that new EV customers are unwilling to pay a substantial premium for battery-electric models. 

Ford said its EV unit posted a loss in earnings before interest and taxes of $1.3 billion, bringing its nine-month EBIT loss to $3.1 billion. The company previously forecast a full-year pretax loss of $4.5 billion for the Ford Model e unit.