Ford Share Plunge: Ford Motor Co faced a turbulent day in the market, with its shares closing down 12.3% on Friday. The cause of this financial rollercoaster was the automaker’s quarterly report, revealing a broader loss from its electric-vehicle (EV) business. Industry pressure, stemming from the formidable Tesla, fueled a price war that affected Ford’s bottom line.
In addition to the financial blow, Ford retracted its 2023 forecast, citing the “uncertainty” surrounding the pending ratification of its new labor deal with the United Auto Workers (UAW) union. This deal, expected to significantly increase labor-related expenses, is adding an extra layer of complexity to the company’s financial outlook.
Ford’s caution extends to its EV business. The automaker revealed it was cutting production of its Mustang Mach-E and scaling back approximately $12 billion in investments in the EV segment. This also includes a delay in its second battery plant in Kentucky.
It’s not just Ford feeling the pinch. The EV market, as a whole, is grappling with challenges. Inflation-wary consumers are becoming more conservative in their purchases, contributing to the prevailing gloom in the EV industry.
Also Read: Historic Labor Deal: U.A.W. and Ford Reach Tentative Agreement
Ford’s EV unit posted a significant quarterly loss in earnings before interest and taxes (EBIT) of $1.33 billion. This marks a notable increase compared to the $1.08 billion EBIT loss in the second quarter. The new labor agreement reached with UAW entails a 25% wage increase for 57,000 workers over nearly five years, effectively ending a strike at some of the automaker’s largest factories.
However, this agreement comes at a cost. Ford anticipates that the new contract will add $850 to $900 in labor costs per vehicle. It’s not just about the financial losses; Ford’s market capitalization has also taken a hit, losing approximately $4.32 billion throughout the strike’s duration, according to LSEG data.
General Motors (GM), Ford’s rival, has faced its own set of challenges. Unlike Ford, GM has not yet reached an agreement with UAW. In response, GM withdrew its 2023 results forecast earlier this week and revised its frequently stated goal of producing 400,000 EVs by mid-2024.
The EV market’s future is uncertain, with growing pains and intensified competition threatening established players. As industry dynamics continue to shift, automakers will need to navigate a rapidly changing landscape to secure their place in the future of transportation.
Our Reader’s Queries
Why is Ford stock dropping?
Ford’s Q3 earnings report was a disappointment as it failed to meet consensus earnings estimates. The company also withdrew its 2023 profit guidance, which it had previously raised during the last earnings call. As a result, Ford’s stock has been falling.
Why is Ford stock so low 2023?
For roughly six weeks earlier this year, Ford was embroiled in labor disputes that led to a halt in production at its factories. This caused a great deal of uncertainty and concern among investors, who were understandably worried about the impact of this disruptive event.
Ford’s market share has taken a hit, dropping to 12.8% due to underperforming sales. This is according to Cox Automotive calculations, which show a decline from 13.6% a year ago. While the second quarter remained steady, the Ford brand’s share was responsible for the majority of the drop.
How high is Ford stock expected to go?
F stock is expected to see a significant increase in its stock price over the next 12 months, according to 12 stock analysts. The average forecasted price is $14.19, which represents an 18.55% increase. The lowest target is $11, while the highest is $20. Analysts have rated F stock as a buy on average. These price targets were last updated on Dec 4, 2023.