Before the bell on Friday, Ford Motor Co. (F.N.) shares dropped 3.8% as the carmaker revealed more significant losses from its electric vehicle (E.V.) division as a result of pressure from a pricing war instigated by market leader Tesla (TSLA.O.).
Due to “uncertainty” surrounding the upcoming ratification of its new labor agreement with the United Auto Workers (UAW) union, which is anticipated to result in a significant rise in labor-related costs, the Detroit manufacturer also withdrew its 2023 projection.
Ford said it was reducing the production of the Mustang Mach-E and reducing its $12 billion in investments in the E.V. market, including postponing its second battery facility in Kentucky. It issued a warning about the continued difficulties in its EV business.
“We believe that the rise in battery raw material costs has negatively impacted the outlook for BEV (battery electric vehicles) profitability and, consequently, Ford’s profitability,” the analysts at Wells Fargo stated in a report.
The company’s quarterly report highlighted the negative sentiment around the EV market. As a result of increased inflation, customers have been cutting back on various expenditures. Ford said on Thursday that its electric vehicle (EV) division had a $1.33 billion quarterly loss in profits before interest and taxes (EBIT), down from a $1.08 billion EBIT loss in the previous quarter.
The UAW and Ford signed a tentative deal on Wednesday, officially ending the strike at some of the automaker’s significant facilities. The accord calls for a 25% salary rise for 57,000 workers over roughly five years.
Chief Financial Officer John Lawler of Ford stated in a conference on Thursday that the company anticipates an increase in labor costs per car of $850 to $900 under the new deal.
According to LSEG statistics, the automaker’s market capitalization has decreased by around $4.32 billion throughout the strike.
A competitor that hasn’t yet secured a deal with UAW, General Motors (GM.N.), lowered its regularly stated target of manufacturing 400,000 EVs by mid-2024 and dropped its 2023 performance prediction earlier last week.
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