Ford (F.N) and General Motors (GM.N) have unveiled ambitious plans to invest billions in the development of new electric cars while paying investors back. All of this will be financed by strong revenues from combustion-powered trucks and SUVs.
Analysts said that such plans are in jeopardy due to the rising costs of the United Auto Workers strikes and the subsequent large contract settlements.
In a letter to clients dated October 12, Morgan Stanley analyst Adam Jonas said that “reduction in capital spending, delayed EV targets, greater sharing of costs, and other changes to the corporate ‘portfolio’ could be on the horizon.”
Ford will release its third-quarter earnings on October 26 after GM on October 24. GM has already hinted that strike-related expenses may cost them $200 million in third quarter profits.
According to a report published on Monday by JP Morgan analyst Ryan Brinkman, the strikes have cost GM and Ford more than $500 million. According to Brinkman, Ford is currently losing $44 million daily while GM is losing $21 million daily.
The UAW President Shawn Fain’s order to walk out of Ford’s Kentucky Truck assembly facility, the company’s most lucrative endeavor internationally, had a significant negative impact on Ford on October 11. According to Fain in a video speech on Friday, Kentucky Truck brings in $25 billion annually, or $48,000 each minute.
Fain said, “Go get the big checkbook,” when a top Ford official claimed the carmaker had hit its spending cap on a new union deal. The one Ford uses to spend millions on corporate executives or gifts to Wall Street firms.
According to Ford’s most recent financial report, the company paid out dividends of $3.8 billion during the first half of this year. In May, the business informed investors of its goal to annually distribute 40% to 50% of free cash flow to investors through dividends and share repurchases.
