Ford Shares Tumble


Ford’s shares have dropped 15% in the last month. There could be several reasons. The UAW is hungry for a costly new contract. Quality trouble will not go away.

The United Auto Workers has been a thorn in the side of the car industry for decades. Each time it negotiates with America’s car makers, it threatens to erode margins. That is about to happen again in a way that could be financially crippling to the big companies. (These American jobs had zero union members last year.)

The asked-for increase, according to most analysts, is 40%. According to The Wall Street Journal, over a four-year contract, “it would be broken up into a 20% increase upon the contract’s ratification, and four additional 5% wage increases given each year.” The UAW believes this is less than the recent pay of car company CEOs. It is absurd to compare the pay of three executives to the pay of tens of thousands of workers. The UAW should have come up with a less crazy comparison, which might be rising earnings.

Earlier this year, Ford announced its plans to manufacture 600,000 EVs annually by the end of 2023. However, this target has now been postponed to 2024 due to Ford’s assessment that the adoption of EVs has been slower than anticipated. This comments is odd, especially since Tesla managed to deliver 466,000 vehicles in the second quarter alone. Ford remains significantly behind in terms of market share and has the added challenge of navigating Tesla’s price reductions, which could lead to intense competition and a potential decrease in profits.

Finally, quality issues continue to plague that automaker, much more than most of the balance of the industry. One of Ford management’s promises to investors last year was that it would drive up the quality of its vehicles. One byproduct of poor quality is recalls. These can cost a car manufacturer hundreds of millions of dollars a year.

Ford has let investors down again.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Ford recently recalled 870,701 of its F-150 pickups, more than it sells in a year. The F-150 is the largest-selling vehicle in America, making up over a third of Ford’s sales. Those recalled were models from 2021 to 2023.

The National Highway Traffic Safety Administration document about the recall says, “Damaged electric parking brake wiring may lead to inadvertent parking brake application while driving, potentially resulting in loss of control of the vehicle and increasing the risk of a crash.” If that seems dangerous, that’s because it is.

In this case, Ford’s recall is extremely visible. The F-150 is not only Ford’s flagship, but its EV flagship is the F-150 Lightning. The recall affects the image of the entire model.

Ford’s future looked brighter than today’s several weeks ago. What a difference a month makes. (This is every major automaker’s plan to go electric.)

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Source: Read Full Article