We’re hopeful the UAW strike isn’t costing Ford as much lost production as GM
Investors just learned how much production the UAW strike has cost General Motors (GM). We hope things won’t be so bad for Ford (F), which reports earnings Thursday night. Last month, the UAW began a strike against the three major automakers in Detroit after Ford, General Motors and Chrysler parent Stellantis (STLA) failed to reach a new labor contract with the union. Since then, negotiations between the two sides have been on-and-off, with strikes escalating but no breakthrough. On Wednesday, The Associated Press reported that Ford and the United Auto Workers may be closing in on a tentative contract agreement. But as we’ve seen over the past six weeks, there are no guarantees. The strike had a $200 million impact on third-quarter earnings before interest and taxes (EBIT), GM said Tuesday morning when it reported better-than-expected third-quarter earnings per share and revenue. GM management said the strike has impacted earnings before interest and taxes (EBIT) by another $600 million so far in the fourth quarter. Going forward, strikes at critical facilities will cost about $200 million a week as of Monday, the team said. However, this number is expected to increase. Hours after General Motors’ earnings report was released, the United Auto Workers union expanded a strike against the automaker to include a key full-size SUV plant in Texas. Ford’s third-quarter results are also expected to be strong. Wall Street expects earnings to rise 50% to 45 cents per share, according to analyst consensus forecasts compiled by LSEG (formerly Refinitiv). Revenue grew 4.5% to $41.2 billion. We’ll have an update on the impact of the ongoing strike on Ford’s production during the report and post-earnings conference call. UBS said in an updated situation analysis earlier this month that it believed the impact of the union action on Ford would be more “limited” and expected an adverse impact of less than $100 million in the third quarter. Analysts believe Ford’s fourth-quarter results may bring a more significant loss of $350 million. But again, that would be well below GM’s expectations. Given the uncertainty over the financial impact and the strike’s duration, analysts said they wouldn’t be surprised if Ford followed GM’s lead and withdrew its forward guidance for now. UBS does believe Ford’s “profitability can be better than expected” because of its strong cash flow and the automaker’s higher-margin combustion-engine vehicles. Jim Cramer said “these companies are hostages” to the union’s lofty demands. The strike has been a hangover for Ford’s stock price, which has fallen 8.5% in the past month. Shares of General Motors and Stellantis have fallen 12.5% and 1.5% respectively in the past month. Stellantis will report earnings next Tuesday. F General Motors, STLA 1M Mountain Ford, General Motors and Stellantis 1 Month Another industry issue highlighted by Cramer is that “electric vehicle momentum has definitely stalled.” General Motors Chief Executive Mary Barra said the automaker will delay the production of electric vehicles in North America to “maintain strong pricing” while adapting to slowing demand for electric vehicles. Ford halted construction of a $3.5 billion electric vehicle battery plant in Michigan in September due to union negotiations, Chief Executive Jim Farley said. “We’ve always felt… if gas prices went up a lot, it would reignite (electric vehicles). This is when gas prices go up but haven’t reignited yet,” Cramer explained. “If I were running Ford, I would make it so that it’s time to go to hybrids,” he added. Earlier this month, Ford reported a 7.7% increase in third-quarter vehicle sales, driven by its “best hybrid sales ever.” Sales of F-150 and Maverick hybrid trucks increased 41.4% compared with the same period last year. Bottom line: Given strong demand and continued EV losses, it may be time for Farley to reevaluate Ford’s strategy for rolling out more hybrids. We’ll have to see what the EV division does in the third quarter and what management thinks about the future. And, the latest updates on the strike and its impact on Ford production are crucial for investors like us. (Jim Cramer’s Charitable Trust is Long F. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will Receive trade alerts before Jim Cramer 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 is created or created by any information you receive in connection with the Investment Club. No specific results or profits are guaranteed.
Ford Motor Company CEO Jim Farley speaks during a news conference at the Rouge Complex in Dearborn, Michigan, on September 17, 2020.
Rebecca Cook | Reuters
Investors just learned the cost of a UAW strike General Motors (General Motors) Production losses.We hope it’s not that bad Ford (F), reports earnings Thursday evening.
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