On a bleak Thursday, Ford Motor (F.N) delivered a grim update by withdrawing its full-year financial forecast, citing "uncertainty" related to the impending ratification of its deal with the United Auto Workers (UAW) union. In an even more ominous declaration, the company warned of unrelenting pressures on the electric vehicle front, sending shockwaves through the financial markets as its shares plummeted by over 4% in the after-hours trading.
Just the day before, Ford and the UAW had clinched a tentative agreement, which includes a staggering 25% salary hike for its 57,000 workers over a grueling 4.5-year period. The end of the strike at some of Ford's mammoth manufacturing facilities was bought at an exorbitant cost – Ford anticipates that this new contract will add a bone-chilling $850 to $900 in labor costs per vehicle.
The concessions made by Ford in this pact are nothing short of cataclysmic, according to CFRA research analyst Garrett Nelson, who ominously stated that they would inflict severe wounds on the company's profit margins, leaving it gasping for air in the shadow of competitors like Tesla and other non-union auto manufacturers.
Ford's distressing concerns over the fading demand for electric vehicles coincide with General Motors (GM.N), its formidable adversary, postponing a $4 billion electric truck plant in Michigan, casting a gloomy pall over the entire industry.
John Lawler, Chief Financial Officer of Ford, underscored the company's chilling decision to delay its colossal investments in new electric vehicle and battery production capacity, attributing it to the "tremendous downward pressure" on prices, leaving an eerie sense of foreboding. Ford's electric vehicle losses are nothing short of nightmarish, estimated at a staggering $36,000 per vehicle for the 36,000 units delivered this quarter, a gruesome escalation from the already harrowing loss of $32,350 per electric vehicle in the preceding quarter.
In a chilling revelation made during Ford's second-quarter earnings briefing in July, CEO Jim Farley had laid bare the company's spine-tingling strategy to slow down the production of loss-making electric vehicles, opting instead to funnel resources into Ford's commercial vehicle unit and seeking to quadruple sales of gas-electric hybrids over the next five years. Ford, like an entire army of competitors, now finds itself trapped in a sinister struggle to balance pricing, profit margins, and the chillingly receding demand for electric vehicles, with affordability looming as a haunting specter for consumers.
In a macabre twist, General Motors (GM) also withdrew its 2023 financial forecast during the same week and took the spine-chilling step of retracting its oft-repeated ambition of building 400,000 electric vehicles by mid-2024. Ford's adjusted third-quarter earnings per share, standing at a paltry 39 cents, missed the Wall Street consensus target of 45 cents, evoking eerie whispers of impending doom.
Ford's revenue, when excluding Ford Credit, amounted to a grim $41.18 billion, just shy of Wall Street's forecasted $41.22 billion, casting a shadow of despair. The company's electric vehicle unit, in an alarming revelation, recorded losses in earnings before interest and taxes amounting to a spine-chilling $1.3 billion for the quarter, contributing to a horrifying nine-month EBIT loss of $3.1 billion. Ford had previously prophesied a full-year pretax loss of $4.5 billion for its Ford Model e unit. The electric vehicle business, its future seemingly cloaked in darkness, grapples with severely compressed prices and profitability, as customers refuse to pay a premium for electric vehicles over their hauntingly familiar combustion and hybrid counterparts.
In an eerily similar year-over-year comparison, Ford's third-quarter profit of $1.2 billion stood in stark contrast to a loss of $827 million in the same period the previous year. The loss from the prior year had included a blood-curdling $2.7 billion noncash writedown linked to Ford's investment in the now-shuttered Argo automated vehicle business. On a more sinister note, Ford's Ford Pro commercial vehicle business and Ford Blue combustion and hybrid vehicle business both witnessed lower year-on-year sales, sinking EBIT margins and EBIT revenues, leaving an atmosphere of impending doom. As the company's adjusted free cash flow plummeted to a hair-raising $1.2 billion from $3.6 billion in the preceding year, the financial abyss seems to be deepening.