Follow The Leader – Ford Reinstates Earnings Guidance

Ford (NYSE: F) has a new, post-UAW-strike outlook for full-year 2023 operating results it said this morning after GM provided an unexpectedly strong one yesterday. Ford withdrew 2023 financial guidance in late October during the UAW strike of some notably profitable US operations. Ironically, the new forecast by Ford CFO John Lawler was given at the Barclays Global Automotive and Mobility Tech Conference, following a presentation by Paul Jacobson, GM EVP and Chief Financial Officer. Yesterday GM increased its 2024 dividend while minimizing the effect of the UAW strike tallied at $1.1 billion. GM said full-year net income was forecast between $9.1 billion and $9.7 billion, down from $9.3 billion and $10.7 billion.

Ford now projects full-year adjusted EBIT of $10.0 billion to $10.5 billion, and adjusted free cash flow of between $5.0 billion and $5.5 billion. Both are non-GAAP financial measures Although affected U.S. operations have been restarted, guidance reflects effects of strike-related manufacturing disruptions on wholesales and revenue. Ford was silent on the dividend.

Lawler said that full-year 2023 adjusted earnings before interest and taxes of $10.0 billion to $10.5 billion would include $1.7 billion in strike-related lost profits – $1.6 billion of that from the fourth quarter because of interruptions in production of high-margin trucks and SUVs and, in turn, vehicle wholesales about 100,000 units lower than planned.

Ford generated $4.9 billion of net income and $9.4 billion in adjusted EBIT through the first three quarters of the year, prior to the full effects of the work stoppage.

The new U.S. labor agreement with the UAW is expected to cost $8.8 billion over the life of the contract, with gross wages, accelerated wage progression and cost of living adjustments representing the largest three elements of that total. Lawler said again that the cost effect is anticipated to be about $900 per vehicle by 2028 – or about 60 to 70 basis points of adjusted EBIT margin, which Ford will work to offset through higher productivity and lower expenses.

“This industry is going through the biggest technology-led transformation we’ve ever seen and some companies, new and old, are going to be left behind,” Lawler said before the conference. “Ford+ is the right strategy to win – we’ve got a highly talented team that allocates capital with great discipline, so that we’re executing with consistency, generating strong growth and profitability, and are less cyclical.”

Ford plans to report fourth-quarter and full-year 2023 financial results – and provide initial guidance about its financial expectations for the full–year 2024 after the close of business on Tuesday, 6 February.

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