Investors just got a look at how much the United Auto Workers strike is costing General Motors (GM) in lost production. We’re hoping it won’t be as bad at Ford (F), which reports earnings Thursday evening. The UAW began striking Detroit’s three automakers last month after Ford, GM and Chrysler-parent Stellantis (STLA) failed to reach a new labor contract with the union. There have been on-and-off talks and escalating walkouts since then but no breakthroughs. On Wednesday, the Associated Press reported that Ford and the UAW may be getting closer to a tentative contract agreement. But as we’ve seen in the past six weeks, there are no guarantees. At GM, the strike had a $200 million impact on third-quarter EBIT (earnings before interest and taxes), the company revealed Tuesday morning when it reported better-than-expected Q3 earnings-per-share and revenue. GM management said there’s been another $600 million in walkout impact on EBIT so far in Q4. Going forward, the team said strikes at key facilities, as of Monday, would cost about $200 million per week. That number, however, is expected to increase. Hours after GM’s earnings were released, the UAW expanded its strike against the automaker to a key full-sized SUV plant in Texas. At Ford, third-quarter results are expected to also be resilient. Wall Street is looking for earnings-per-share to increase 50% to 45 cents, according to the analyst consensus estimate compiled by LSEG, formerly Refinitiv. Revenue is rising 4.5% to $41.2 billion. Within the report and on the post-earnings conference call, we’ll be watching out for updates on the toll the ongoing strike is having on Ford production. In its latest look at the situation, UBS earlier this month said it believes the union actions are having a more “limited impact” on Ford, estimating less than a $100 million Q3 headwind. The analysts see a more significant $350 million potential hit in Ford’s fourth quarter results. But again, that would be far less than what GM has projected. Given the financial impact and uncertain duration of the strike, analysts said they wouldn’t be surprised if Ford were to follow GM’s lead and temporarily pull forward guidance. UBS does think that “profitability can hold up better than expected” at Ford on strong cash flow and higher profits from the automaker’s internal combustion engine vehicles. “These companies are hostage” to the union’s lofty demands, Jim Cramer said. The strike has been an overhang on Ford shares, which dropped 8.5% over the past month. GM and Stellantis fell 12.5% and 1.5%, respectively, over the past month. Stellantis is set to report earnings this coming Tuesday. F GM,STLA 1M mountain Ford, GM and Stellantis 1-month Another industry issue Cramer highlighted is that “EV momentum has definitely stalled.” General Motors CEO Mary Barra said that GM will delay the pace of electric vehicle production in North America to “maintain strong pricing” while adjusting to slower EV demand. Ford has already halted construction on a $3.5 billion Michigan EV battery plant in September due to union negotiations, according to CEO Jim Farley. “We always felt … if gasoline went up a lot it would reignite [EVs]. This is the time when gasoline has gone up and it has not reignited,” Cramer explained. “If I were running Ford, I would make it so that it’s time to go hybrid,” he added. Earlier this month, Ford reported third-quarter auto sales were 7.7% higher, driven by “best-ever sales of hybrids.” Sales of the F-150 and Maverick hybrid trucks, which posted a 41.4% year-over-year increase. The bottom line: It may be time for Farley to reevaluate Ford’s strategy to push more hybrid vehicles given that strong demand and the continued EV losses. We’ll have to see what the EV division did Q3 and what management says about the future. And, updates on the strike and its impact on Ford production will be crucial for investors like us. (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Ford Motor Co. CEO Jim Farley walks to speak at a news conference at the Rouge Complex in Dearborn, Michigan, September 17, 2020.
Rebecca Cook | Reuters
Investors just got a look at how much the United Auto Workers strike is costing General Motors (GM) in lost production. We’re hoping it won’t be as bad at Ford (F), which reports earnings Thursday evening.