Ford Motor Company has reinstated its 2023 guidance after withdrawing it last month due to the impacts of labor strikes and negotiations with the United Auto Workers union. The company now predicts between $10 billion and $10.5 billion in adjusted earnings before interest and taxes, or EBIT, and adjusted free cash flow of between $5 billion and $5.5 billion. This is lower than the previously announced guidance of adjusted-EBIT of between $11 billion and $12 billion and adjusted free cash flow of $6.5 billion to $7 billion.
Here is a closer look at what Ford’s updated forecast means for the company, its workers, and its investors:
## Impact of UAW Deal
Ford said the new UAW labor agreement is expected to cost $8.8 billion over the life of the contract, which expires in April 2028. This updated figure is lower than the previously disclosed $9.3 billion impact announced by General Motors over the length of their agreement.
## Previous Projections
Before the UAW strikes, Ford’s Chief Financial Officer John Lawler had expressed confidence in the company’s ability to meet its guidance. He mentioned during the company’s third-quarter earnings report that the UAW strike had cost the company $1.3 billion in earnings due to lost production of about 80,000 vehicles. The updated impact amount now stands at $1.7 billion, including $1.6 billion in the fourth quarter.
## Electric Vehicle Investments
In response to the new costs associated with the labor deal, Ford also announced plans to cancel or postpone $12 billion in investments related to electric vehicles. Additionally, the company stated that the UAW agreement is expected to add about $900 in costs per assembled vehicle by 2028.
## Reinstated Guidance
The company confirmed that it plans to discuss the reinstated guidance at a Barclays investor conference Thursday morning.
In a similar move, General Motors said it intends to increase its quarterly dividend next year by 33%, initiate an accelerated $10 billion share repurchase program, and reinstate its 2023 guidance to include an estimated $1.1 billion in earnings before interest and tax impact from the UAW strikes. Both UAW agreements include at least 25% hourly pay raises, the reinstatement of cost-of-living adjustments, and enhanced profit-sharing payments, among other benefits.
While Stellantis, the parent company of Chrysler, has reached a deal with the UAW, they have not disclosed the expected costs of their labor pact with the union. This development, in addition to the changes in financial guidance, has significant implications for American automakers and the labor force.
