Ford Motor reinstated its 2023 guidance after withdrawing it last month due to labor strikes and negotiations with the United Auto Workers union. The announcement was made on Thursday, and the guidance now calls for $10 billion to $10.5 billion in adjusted earnings before interest and taxes, and adjusted free cash flow of between $5 billion and $5.5 billion. This is a change from its original guidance, which included adjusted-EBIT of between $11 billion and $12 billion and adjusted free cash flow of $6.5 billion to $7 billion.
The new UAW labor agreement is expected to cost Ford $8.8 billion over the life of the contract, which expires in April 2028. Prior to the UAW strikes, Ford was on track to hit its guidance, said Chief Financial Officer John Lawler during the company’s third-quarter earnings report. However, the strikes cost the company $1.3 billion in earnings due to lost production of about 80,000 vehicles, including roughly $100 million during the third quarter, and this increased to $1.7 billion, including $1.6 billion in the fourth quarter.
The UAW deal was expected to add $850 to $900 per vehicle assembled, and Ford plans to offset the additional costs by finding productivity and efficiencies and cost reductions throughout the company. The company also said it plans to cancel or delay $12 billion in investments related to electric vehicles.
This announcement comes after General Motors revealed its plans to increase its quarterly dividend next year by 33% to 12 cents per share and initiate an accelerated $10 billion share repurchase program.
Both UAW agreements include at least 25% hourly pay raises, the reinstatement of cost-of-living adjustments, and enhanced profit-sharing payments. This is a rapidly evolving story, so stay tuned for more updates.
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