Cramer urges investors to stick with Ford, despite strike risks

An unexpected UAW strike could deal a major blow to the automaker’s profitability if Ford Motor Co.’s largest plant remains closed for an extended period. Still, now is not the time to give up on Ford, as we expect an eventual deal to be reached between the union and Detroit’s Big Three automakers. About 8,700 employees at the automaker’s Kentucky truck plant, the world’s largest and most profitable, were threatened Wednesday night after the United Auto Workers union said Ford refused to make further concessions in contract talks. A strike was held. The union last month ordered strikes at two other Ford assembly plants, as well as plants run by Chrysler parent Stellantis (STLA) and General Motors (GM). Ford shares were down about 2.4% Thursday afternoon, at just under $12 a share. Jim Cramer said Thursday that the situation “has taken a very bad turn.” “If Ford accepted the deal Fein wanted, thousands of jobs would be laid off,” he argued. In the meantime, Jim urged investors to keep watching the automaker. “I still believe there will be a solution.” The club also believes Ford could be more profitable if it doubled down on hybrid cars and combustion-engine trucks, as Ford’s electric vehicle division continues to lose money. “Ford has not received word,” Fein said in a statement Wednesday. “It’s time for Ford to enter into fair contracts with the rest of the Big Three,” he added. Fein has been declaring war on the Big Three automakers since March, calling for a 46% increase in base pay, increased pensions and a 32-hour work week. The strike at Ford’s Kentucky plant, which generates $25 billion in annual revenue and accounts for about one-sixth of the company’s global auto revenue, apparently caught Ford off guard. The plant builds the Ford Super Duty pickup truck as well as the Ford Expedition and Lincoln Navigator SUVs. Ford called the UAW’s decision “highly irresponsible but not surprising,” according to a statement released Wednesday. According to Bank of America, the UAW strike has now affected 35.5% of Ford’s total production. The shutdown of the Kentucky truck plant could reduce Ford’s earnings before interest and taxes (EBIT) by $247 million a week, or 5 cents a share, the bank said. The company expects 2023 EBIT of $10.7 billion and earnings per share of $1.96. “Given that Ford has made the largest concessions to unions among the Detroit Three, we view this move by the UAW as concerning,” Bank of America analysts wrote in a research note on Thursday. They added “However, since Ford has been the most lenient, the UAW may believe it can gain additional concessions by increasing pressure,” said Ford. In a statement Wednesday, Ford said it had offered hourly workers a 15% guarantee salary increases and one-time payments, and “increased benefits for the duration of the contract.” Meanwhile, Wells Fargo forecast on Wednesday that “the upgrade is a sign that the UAW could be close to a contract proposal with Ford in the next 1-2 weeks.” (Jim Cramer’s Charitable Trust is Long F. (See here for the complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim Cramer makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.

In the early morning of October 12, 2023, in Louisville, Kentucky, factory workers and UAW union members lined up on picket lines outside the Ford Motor Company’s Kentucky Truck Plant.

Luke Schallert | Getty Images

Unexpected strike by United Auto Workers Ford Motor Company’s (F) Prolonged closures of the largest plants could deal a significant blow to automakers’ profitability. Still, now is not the time to give up on Ford, as we expect an eventual deal to be reached between the union and Detroit’s Big Three automakers.