New details of Ford ‘s (F) deal to end the United Auto Workers strike were revealed over the weekend. But how this record 4½-year labor contract will impact the company’s finances remains uncertain, and It represents yet another headwind for the Club holding following last week’s underwhelming third-quarter earnings. The UAW on Sunday released parts of its tentative agreement with Ford, which was first announced last Wednesday. The highlights include $5,000 ratification bonuses and other economic incentives such as 25% compounded wage increases and improved profit-sharing payments. Ford also agreed to $8.1 billion in new plant investments. Modeled after the Ford agreement, the UAW reached a tentative labor deal with General Motors (GM) early Monday and one with Chrysler-parent Stellantis (STLA) on Saturday. It’s still unclear how Ford’s tentative agreement with the UAW will impact its future cost structure. But considering Ford employs 57,000 union members, Jim Cramer has said the strikes, led by UAW President Shawn Fain, have been a “source of weakness” for the Detroit automaker. Ford said it will provide a deeper look at the contract and its impact after the deal is ratified. No vote has been scheduled yet. Most of the workers are back on the job. Equally troubling, however, is Ford’s recent financial performance. Ford delivered a poor third quarter last week, missing on profits and automotive revenue due to a pullback in volumes in the Ford Pro segment, which sells its commercial vehicles. Heavy losses in its electric vehicle business called Model e were also to blame. The only third-quarter sales beat was in Ford Blue, its legacy internal combustion engine unit, which also includes hybrids. However, Ford Blue missed on EBIT (earnings before taxes and interest). A headwind the automaker has been battling for years was glaringly evident in Q3: warranty costs. Ford saw a $1.2 billion increase in warranty costs due to high recalls. And, Ford also said the UAW strike caused the company to trim about 80,000 units from its plan and reduced 2023 EBIT by $1.3 billion. “I know that Jim Farley did his best to settle the strike but we need quality cars and quality trucks and they’re not delivering,” Jim said Monday. On EVs, Ford said it plans to deploy disciplined capital allocation and investment, balancing growth, scale, and profitability. Management said they’re being more “judicious” about production and will adjust future capacity to match EV market demand. They will push out about $12 billion in capital expenditures on EVs, which is good to see. At this point, we’re not looking to bail on Ford because its robust Pro and Blue (ICE gas vehicles and hybrids) divisions are still valuable. However, we’re moving closer to putting Ford in the penalty box, and we’re holding off buying on dips. It wouldn’t be the first time. We put Ford in the penalty box earlier this year when it delivered a messy fourth quarter that was a function of its transition to a new business structure that limited production capacity, combined with poor execution. We gave CEO Jim Farley one more quarter to turn things around or else we said we would boot the stock. Ford was able to right the ship in Q1 and outperform in the second quarter, which restored our confidence in management. After Q3 results last week, Ford said it plans to turn itself around by getting more competitive on costs and being more strategic in its future EV transformation. We think the automaker can achieve these goals since it has support from its resilient Ford Blue segment, which continues to be profitable in all regions. (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Members of the United Auto Workers union picket outside the Michigan Assembly Plant in Wayne, Michigan, on Sept. 26, 2023.
Matthew Hatcher | AFP | Getty Images
New details of Ford‘s (F) deal to end the United Auto Workers strike were revealed over the weekend. But how this record 4½-year labor contract will impact the company’s finances remains uncertain, and It represents yet another headwind for the Club holding following last week’s underwhelming third-quarter earnings.
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