Data shows the United Auto Workers (UAW) strike is hurting Ford (F). Revenues, profits, and income fell during strike.
For example, Ford’s quarterly revenues fell from $44.954 billion on 30 June 2023 to $43.801 billion on 30 September 2023. UAW walkouts at Ford began on 15 September 2023. Thus revenues fell before the strike began.
Comparatively, Ford’s revenues fell from $40.190 billion on 30 June 2022 to $39.392 billion on 30 September 2022. History shows Ford revenues fall in the Ford. This is why UAW President Shawn Fain began the strike in September. Fain struck when Ford’s revenues were falling, which brought management to the bargaining table.
Limited Strikes Work
Data shows limited strikes work. Around 46,000 UAW members struck at eight Ford factories and 38 parts warehouses. Yet there are over 57,000 UAW workers at Ford.
However, Ford’s quarterly gross profits fell from $7.483 billion on 30 June 2023 to $6.253 billion on 30 September 2023. Similarly, the quarterly operating income fell from $2.461 billion on 30 June 2023 to $1.129 billion on 30 September 2023. Last year, quarterly the quarterly gross profit fell from $6.999 billion on 30 June 2022 to $5.038 billion on 30 September 2022. Similarly, the quarterly operating income fell from $2.868 billion on 30 June 2022 to $504 million on 30 September 2022.
Meanwhile, Ford’s quarterly operating cash flow fell from $5.035 billion on 30 June 2023 to $4.591 billion on 30 June 2023. In contrast, Ford’s quarterly operating income grew from $2.947 billion on 30 June 2022 to $3.812 billion on 30 September 2022.
Ford (F) has less cash and more debt
Conversely, Ford’s quarterly ending cash flow rose from -$1.149 billion on 30 June 2022 to $1.587 billion on 30 September 2022. Yet Ford’s quarterly operating cash flow fell from $4.264 billion on 30 June 2023 to $11 million on 30 September 2023.
Ford borrowed enormous amounts of money over the past year. For instance, Ford reported a $1.696 billion quarterly financing cash flow on 30 September 2022, a $7.055 billion quarterly financing cash flow on 31 December 2022, and $3.413 billion on 30 September 2023.
Consequently, Ford’s total debt grew from $128.29 billion on 30 September 2022 to $142.662 billion on 30 September 2023. Therefore, I think Ford (F) borrowed an enormous amount of money for the strike.
Meanwhile, Ford’s cash and short-term investments grew from $40.173 billion on 30 September 2022 to $42.821 billion on 30 June 2023, to $41.115 billion on 30 September 2023. Thus, Ford has less cash and more debt because of the strike.
How Ford’s Debt explains the UAW Success
I think Ford’s debt load explains the strike’s success. To explain, Ford (F) has to sell vehicles to pay the $142.662 billion in total debt.
However, Ford could have no new vehicles in showrooms because of the strike. Meanwhile, non-union automakers such as Toyota (TM) and Hyundai will have new vehicles in their showrooms. Moreover, non-union Tesla (TELSA) will have new vehicles on its website and in stores.
Thus, I think Fain read Ford’s financial numbers and noticed the debt. The union boss spotted Ford’s weakness and exploited it. That’s a new level of strategic thinking from union leaders that could change American business.
Tellingly, Toyota raised production workers’ wages in November 2023. For example, Toyota raised production workers’ wages from $31.86 an hour to $34.80, a 9.2% raise, Manufacturing Drive reports. Meanwhile, Toyota raised skilled workers’ hourly wage from $39.50 to $43.20 per hour, a 9.4% increase.
The UAW and the Big Three Detroit Automakers; Ford (F), General Motors (GM), and Stellantis NV (STLA), AKA Chrysler, in late October 2023. Thus, Toyota executives fear the UAW and are trying to keep it out.
Can Ford (F) afford the Strike Settlement?
Skeptical investors will wonder if Ford (F) can afford the UAW strike settlement. I think it can.
For example, the UAW and Ford’s tentative agreement will raise Ford workers’ top wage by 30% to over $40 an hour, Axios claims. Similarly, the tentative agreement raises Ford’s starting wage by 68% to over $28 an hour.
Other UAW wins at Ford include a restoration of the cost-of-living agreement (COLA) regular raises pegged to inflation and a three-year wage progression. The agreement also ends unpopular wage tiers (lower wages for newer hires) and provides a $1,500 for vehicle purchase for all UAW members. There are changes to Ford’s holiday leave policy.
However, the UAW did not win key demands, such as a 32-hour work week and a restoration of defined benefit pensions. To explain, in a defined benefit pension, employers give employees a monthly cash payment. However, the only retirement plans Ford currently offers are contributions to individual retirement accounts (IRAs).
Ford (F) can Afford the Strike Settlement
I think Ford (F) can afford the strike settlement because it had $44.115 billion in cash and short-term investments and $268.073 billion in total assets on 30 September 2023. Ford’s total assets grew from $246.919 billion on 30 September 2022.
Thus, Ford has the cash to pay the wage increases and the ability to borrow funds to cover wage increases if necessary. For example, I calculate Ford issued $14.372 billion in new debt between 30 September 2022 and 30 June 2023.
Mr. Market, however, is skeptical of Ford’s ability to meet UAW demands. Ford’s share price fell from $12.07 on 9 October 2023 to $10.05 on 8 October 2023.
Conversely, I consider Ford a bargain at $10.05 because it had $246.19 billion in total assets on 30 September 2023. Thus, I think Ford’s value far exceeds its share price.
Moreover, Ford has scheduled 10 15¢ quarterly dividends between 1 December 2023 and 1 December 2025. Consequently, Ford shares offered a 60¢ forward dividend and a 5.97% forward dividend yield on 8 October 2023.