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Ford Motor Co. said it fell short of third-quarter earnings expectations, citing higher costs and lower quality, a day after it won labor peace through a tentative contract with the United Auto Workers.
With the six-week strike resolved pending a ratification vote by the union membership, Ford late Thursday pulled its forecast of adjusted earnings before interest and taxes in a range of $11 billion to $12 billion, which it had boosted in July. Crosstown rival General Motors Co., which still hasn’t settled with the UAW, likewise suspended its 2023 guidance.
“We were negatively impacted by the strike, and our cost and quality remain a drag on our business,” Chief Executive Officer Jim Farley said on a conference call with analysts.
The union’s work stoppage, which began on Sept. 15, cost the company $100 million in the third quarter and a total of $1.3 billion so far, John Lawler, Ford’s chief financial officer, said in a media briefing. Ford’s deal with the UAW will add an additional $850-$950 per vehicle, he said, shaving margins by 60-to-70 basis points.
“We going to have to find efficiencies and productivity throughout the system and throughout the company to help mitigate the impacts,” Lawler said.
Shares of the company fell 3.7% in premarket trading Friday in New York. The stock has dropped 2.4% on the year through Thursday’s close.
Profit Miss
The Dearborn, Michigan-based carmaker posted adjusted earnings per share Thursday of 39 cents, 9 cents higher than a year ago but below the 47 cents consensus analyst estimate compiled by Bloomberg. Ford’s revenue in the third quarter of $43.8 billion, was better than the $41 billion analysts expected.
“It’s been a challenging situation for us, but our business is never short of challenges,” Farley said of the strike, calling Ford’s performance in the quarter “mixed.”
One reason for that muted assessment: Ford has some 50,000 vehicles on hold due to quality-related issues in the third quarter, CFO Lawler told reporters.
The company is tapping the brakes harder on a shift to electric vehicles, something it signaled in July. Lawler said on the conference call with analysts that Ford will “push out” $12 billion in EV-related investments, part of the $50 billion it has earmarked for spending on EVs.
A second planned battery plant in Kentucky with South Korean partner SK ON is being delayed, he said. Ford also is reducing production of the electric Mustang Mach-E at a plant in Mexico that was expanded earlier this year.
The carmaker’s struggles in its nascent electric vehicle business, known as Model e, resulted in a loss before interest and taxes of $1.33 billion in the quarter ended Sept. 30, more than the $1.27 billion loss analysts expected.
Truck Sales
Sales of Ford’s signature EV, the F-150 Lightning, plunged 46% in the quarter as the company shut its factory for expansion, delayed delivery of trucks for “quality checks” and temporarily laid off workers at the plant for what the company called “multiple constraints.”
“Great product is not enough in the EV business anymore,” Farley said. “We have to be totally competitive on cost.”
The CEO noted EV market leader Tesla Inc. has set a high benchmark for rivals by trimming cost and scaling output.
The traditional internal combustion engine unit, known as Ford Blue, saw third quarter earnings before interest and taxes of $1.72 billion, below analysts’ average forecast of $1.94 billion. That came despite a 7.7% increase in US vehicle sales in the quarter, led by models like the Bronco SUV and F-150 pickup truck.
Ford’s commercial business, known as Ford Pro, posted earnings before interest and taxes of $1.65 billion, undershooting the $2.16 billion analysts expected. That unit has seen growth in selling software services to help fleet owners better manage their vehicles, a business Ford sees growing up to 1,000% over the next few years.
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