Title: Ford Motor Co. Expects $8.8 Billion Increase in Labor Costs Over 2023 UAW Contract
Subtitle: Plans to Offset Costs Through Higher Productivity and Lower Expenses
Swerd Media – [Date]
Ford Motor Co. recently announced that its labor costs in North America are set to increase by a staggering $8.8 billion throughout the duration of the 2023 UAW (United Auto Workers) contract. The increase is attributed to gross wages, accelerated wage progression, and cost of living adjustments. However, the company remains committed to managing these costs by focusing on higher productivity and lower expenses.
Ford projects that by 2028, the cost impact of these labor expenses will amount to approximately $900 per vehicle. However, the automaker is determined to avoid simply transferring these costs to consumers by exploring alternatives to maintain competitive retail prices.
Due to the UAW strike, Ford withdrew its financial guidance for 2023 but has since provided an updated outlook. Anticipating full-year 2023 adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion, the company also accounted for $1.7 billion in strike-related lost profits. Furthermore, Ford expects free cash flow for the same period to fall between $5 billion and $5.5 billion.
Ford’s release did not specifically address how the increase in labor costs would affect consumer prices. However, a spokesperson assured that the costs would not be transferred directly to the retail price. While the announcement encompasses labor costs in North America, details regarding the contract negotiations with the Canadian union Unifor were not disclosed.
Ford Chief Executive Officer, Jim Farley, has emphasized the company’s commitment to electric vehicles while providing hybrid options to consumers. Seeking to address concerns raised by investors regarding warranty repair and recall costs, the company is actively working towards improving quality. This focus is expected to alleviate investor worries and improve overall customer satisfaction.
In comparison, General Motors (GM) projects an increase of $9.3 billion in labor costs compared to its 2019 contracts. According to GM spokesperson Jim Cain, this figure highlights the significant impact expected on labor expenses across the automotive industry.
Meanwhile, the UAW is presently engaged in efforts to organize an additional 13 auto companies within the United States. These ongoing endeavors are aimed at securing fair working conditions and benefits for employees across the industry.
As Ford navigates this significant increase in labor costs, the company remains dedicated to managing expenses and maximizing productivity. With a focus on electric vehicles and improvements in quality control, Ford is determined to remain competitive and ensure a positive future for its workforce and customers alike.
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