Ford Motor Co. saw its stock dip by 4% in after-hours trading on Thursday, October 26, following a lower-than-expected quarterly earnings report and the withdrawal of its annual guidance due to an impending agreement with the United Auto Workers (UAW).
The carmaker’s EV unit reported an adjusted loss of $1.3 billion, a figure that left Wall Street reeling. Ford attributed this to customers’ reluctance to shell out for the premium prices of EVs. This disconnect has led to a pause in long-term EV investments.
“Our business is never short of challenges, especially right now with the evolution of the EV market,” said Chief Executive Jim Farley.
In the third quarter, Ford bounced back from a loss of $827 million in the previous year, earning $1.2 billion. Adjusted for one-time items, including a $2.7 billion impairment charge related to the investment in the now-defunct Argo AI driverless car company, Ford earned 39 cents a share.
Despite an 11% rise in revenue to $43.8 billion, Ford fell short of FactSet analysts’ expectations of 46 cents a share on sales of $43.94 billion.
Ford’s EV business segment recorded an EBIT loss of $1.3 billion, due to continued investment in next-gen EVs and challenging market dynamics. The company noted that many North American customers are unwilling to pay premiums for EVs, which significantly flattens EV prices and profit.
Before withdrawing the year’s outlook, Ford was “poised to deliver profitability” within its previous EBIT guidance range of $11 billion to $12 billion.
The earnings report comes as Ford’s striking employees are returning to work following a tentative agreement with the UAW. The agreement is currently undergoing ratification steps, with negotiations between the union and General Motors Co. and Stellantis NV said to be “active.”
Farley assured analysts that once the deal is ratified, Ford will provide a deeper look at the contract and its impact on the business.
Ford’s shares have underperformed the broader equity market, losing about 1.6% so far this year, in stark contrast to the S&P 500 index’s gains of around 8%.
The UAW stated that the current four-year deal grants a 25% increase in base wages through April 2028, raising the top wage at Ford by more than 30% to over $40 an hour, and starting wages by 68% to over $28 an hour.
Ford was the first company to face walkouts at a key factory, with workers at Ford’s Kentucky pickup truck plant walking out on Oct. 11. GM also detailed some of the impacts of the strike this week, particularly through the end of the current quarter, and also withdrew its guidance.