We’re not ready to bail on Ford after the UAW deal. But we have lots of questions

New details of Ford’s (F) agreement to end the UAW strike were released over the weekend. But uncertainty remains about how the record 4.5-year labor contract will affect the company’s finances, another headwind for Club Holdings following last week’s poor third-quarter earnings. The UAW on Sunday unveiled parts of a tentative agreement with Ford that was first announced last Wednesday. Highlights include a $5,000 approval bonus and other financial incentives such as 25% compound salary increases and improved profit-sharing payments. Ford also agreed to invest $8.1 billion in new factories. Modeled on the Ford deal, the United Auto Workers reached a tentative labor deal with General Motors Co (GM) earlier Monday and reached an agreement with Chrysler parent Strantis Corp (STLA) on Saturday. a temporary labor agreement. It’s unclear how Ford’s tentative agreement with the UAW will affect its future cost structure. But given that Ford has 57,000 union members, Jim Cramer said the strike, led by UAW President Shawn Fain, has been a “source of weakness” for the Detroit automaker . Ford said it will study the contract and its implications in more depth once the deal is approved. No votes have been scheduled yet. Most workers have returned to work. Equally troubling, however, is Ford’s recent financial performance. Ford reported poor third-quarter results last week, with profits and auto revenue falling due to lower sales in the Ford Pro segment, which sells commercial vehicles. Severe losses in its electric vehicle business called Model e are also to blame. The only sales growth in the third quarter came from its traditional combustion engine division, Ford Blue, which also includes hybrid vehicles. However, Ford Blue failed to deliver EBIT (earnings before interest and taxes). One headwind the automaker has faced for years was evident in the third quarter: warranty costs. Ford’s warranty costs increased by $1.2 billion due to numerous recalls. Ford also said the UAW strike caused the company to cut plans for about 80,000 vehicles and reduced EBIT by $1.3 billion in 2023. “I know Jim Farley has done his best to address the strike, but we need quality cars and trucks, and they’re not delivering them,” Ford said on Monday. On the electric vehicle front, Ford said it plans to make disciplined capital allocations and investments to balance growth, scale and profitability. Management said they are being “smarter” about production and will adjust future production capacity to meet EV market demand. They’re going to spend about $12 billion in capex on electric vehicles, which is a good thing. We’re not giving up on Ford just yet, as its strong Pro and Blue (ICE gasoline and hybrid) divisions remain valuable. However, we’re getting closer to bringing Ford into the penalty bracket, so we’ll hold off on buying the dip. This isn’t the first time. We placed Ford on the penalty list earlier this year after the company posted chaotic fourth-quarter results, the result of its transition to a new business structure that limited production capacity and poor execution. We gave CEO Jim Farley a quarter to turn things around or we’d start the stock. Ford turned a profit in the first quarter and outperformed the market in the second quarter, restoring our confidence in management. After releasing third-quarter results last week, Ford said it planned to turn things around by becoming more cost competitive and more strategic in its future transition to electric vehicles. We believe the automaker can achieve these goals as it is supported by a resilient Ford Blue segment, which continues to be profitable in all regions. (Jim Cramer’s Charitable Trust is Long F. For a full list of stocks, see here.) As a subscriber to Jim Cramer’s CNBC Investing Club, you’ll get Jim Cramer receives trade alerts before placing a trade. 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.

Members of the United Auto Workers union picket outside the Michigan Assembly Plant on September 26, 2023 in Wayne, Michigan.

Matthew Hatcher | AFP | Getty Images

new details Ford(F) An agreement to end the UAW strike was announced over the weekend. But uncertainty remains about how the record 4.5-year labor contract will affect the company’s finances, another headwind for Club Holdings following last week’s poor third-quarter earnings.

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