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U.S. Auto Makers: Ford Provides 2023 Financial Guidance

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4.5

Andrew R. Michaud

• November 30, 2023

Ford Motor has released its 2023 financial guidance after concluding union negotiations. Despite the inclusion of strike-related costs, the company predicts an operating profit between $10 billion and $10.5 billion, slightly lower than the previous estimates. Excluding strike impacts, Ford is expected to generate approximately $2.5 billion in fourth-quarter operating profit. The guidance appears solid, instilling confidence among investors.

Financial Outlook

Ford Motor, one of the prominent U.S. auto makers, announced its 2023 financial guidance on Thursday. After the successful conclusion of union negotiations, the company can now shed light on the year ahead.

The latest guidance reveals that Ford anticipates earning an operating profit ranging from $10 billion to $10.5 billion. Although slightly lower than the initial projections, it is worth noting that this range includes $1.7 billion in strike-related costs. Consequently, if we exclude these expenses, the guidance becomes approximately $11.7 billion to $13.2 billion, providing a clearer perspective.

Strike Impacts and Forecasts

Analysts predict that Ford is set to generate around $2.5 billion in fourth-quarter operating profit, excluding any impacts from the strikes. However, conflicting estimates exist due to potential strike considerations included in some projections. Wall Street expects about $900 million for the same period.

Investor Confidence

Despite the variations in forecasts, Ford's financial guidance remains solid and reassuring for investors. In response to the news, Ford stock experienced a 2% increase in premarket trading. Likewise, the S&P 500 and Dow Jones Industrial Average futures were also showing growth, rising by 0.2% and 0.5% respectively.

General Motors Reports Strong Financial Guidance for 2023

Shares of General Motors (GM) saw a 2% gain in Wednesday's trading session, thanks in part to the company's optimistic financial forecast for 2023. GM stock experienced a significant surge of over 9% following the announcement of its projected operating profit.

GM now expects to generate an operating profit ranging between $11.7 billion and $12.7 billion in 2023. Although this forecast is slightly lower than the previous estimate of $12 billion to $14 billion, it aligns closely with Wall Street's projected figure of $12.2 billion.

Addressing the concern about higher labor rates increasing production costs, GM mentioned that it has devised plans to counterbalance these increases over time. While labor rates could potentially raise the cost of manufacturing each vehicle by $500 to $600, GM reassured investors that it has strategies in place to offset the entirety of these additional expenses.

Similarly, Ford estimates that the new labor agreement will result in an additional $800 per vehicle in manufacturing costs. Like GM, Ford also assured investors that it has plans to mitigate these increased expenses through improved productivity and reduced overall expenditures.

Both Ford and GM have experienced declines in their share prices since July, with Ford witnessing a drop of approximately 29% and GM facing an 18% decline. However, GM's positive financial guidance for 2023 provides a glimmer of hope for shareholders, potentially restoring confidence in the company's future prospects.