By Nathan Gomes
(Reuters) -Ford Motor on Thursday pegged the cost of a new labor deal at $8.8 billion and joined rival General Motors (NYSE:GM) in cutting its full-year profit forecast due to lost production from a lengthy strike at its U.S. plants.
The deal with the United Auto Workers (UAW) union, reached after weeks of tense negotiations, will add about $900 in labor costs per vehicle by 2028, which Ford said it would work to offset by cutting costs elsewhere.
The automaker now expects adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion for 2023, down from its prior forecast of $11 billion to $12 billion.
The forecast includes $1.7 billion in lost profits from the strike, which Ford also estimated led to about 100,000 units fewer wholesale vehicle sales. Shares of the company were up 1.9% in premarket trade.
Ford's outlook comes a day after GM cut its 2023 profit forecast and said its new labor deals with the UAW and Canadian union Unifor will cost it $9.3 billion through 2028
Ford was the first of Detroit's Big Three automakers to reach a tentative deal with UAW after nearly six weeks of strikes that saw about 45,000 workers stage a walkout and join picket lines across the United States, demanding better wages and benefits.
The UAW's talks with the automakers became a social media spectacle as union chief Shawn Fain livestreamed the twists and turns in their saga mostly on Fridays, while announcing surprise walkouts and accusing the companies of enjoying record profits without sharing them fairly with workers.
A month into the strikes, Ford said the company was "at the limit" of what it could spend on higher wages and benefits. It warned that the strikes, especially at its most lucrative factory, could slash profit, hurt its ability to invest in the business and harm workers.
Days later Executive Chairman Bill Ford called for an end to the "acrimonious round of talks" and urged the UAW to accept a new agreement.
But Fain's persistence forced Ford to up its offer. The deal UAW leaders finally approved included a pay hike of at least 30% for full-time workers and more than double pay for others.
The new deal also included $8.1 billion in manufacturing investments, removed cost-saving provisions such as paying workers at component plants less than those at vehicle assembly plants, and eliminated all lower wage tier plants.
But the deal led Ford, faced with higher labor costs like its peers GM and Chrysler-parent Stellantis, to pull its 2023 forecast in October.
Already grappling with losses in its EV business, softening consumer demand amid higher interest rates and a price war sparked by market leader Tesla (NASDAQ:TSLA), Ford had also said it would slash future EV investment plans by $12 billion.
Even as it restarted construction of an EV battery plant in Michigan last week after a two-month pause, Ford said it would reduce capital investment, capacity and the number of jobs planned, without giving an exact figure.
GM also outlined $10 billion in share buybacks, a 33% dividend increase and substantial spending cuts at its troubled Cruise robototaxi unit.
Dearborn-Michigan based Ford on Thursday also cut its adjusted free cash flow forecast for 2023 to between $5.0 billion and $5.5 billion, compared with its prior forecast of between $6.5 billion and $7 billion.