Ford's Decision to Slow Production of Electric F-150 Trucks

Figuring out the reasons behind the recent developments at Ford Motor and other Detroit-Three auto makers is no easy task. Several factors, including labor negotiations, a slowing economy, supply-chain issues, and the transition to electric vehicles, need to be considered.

Recently, Ford made the decision to slow down the production of its all-electric F-150 Lightning pickup trucks. According to a memo from the United Auto Workers, as reported by The Wall Street Journal, Ford (ticker: F) canceled a shift at its Rouge assembly complex in Dearborn, Mich.

The United Auto Workers attributed the decision to falling sales, although they did not provide any further comments on the matter. However, Ford responded by stating that the schedule adjustment at the Rouge Electric Vehicle Center was due to various constraints. These constraints include supply chain issues as well as the processing and delivery of vehicles held for quality checks following the production restart in August.

It is important to note that production of the Lightning trucks was temporarily paused in February due to battery issues. However, it resumed in August. Unfortunately, this pause had a negative impact on sales. Between March and September, Ford delivered approximately 8,700 Lightning trucks in the U.S. This number is slightly lower than the approximately 8,900 delivered during the same period in 2022.

If there hadn't been any supply chain constraints or battery problems, it is estimated that the number of units delivered between March and September 2023 could have exceeded 20,000.

In conclusion, while there are multiple factors contributing to Ford's decision to slow down the production of their electric F-150 trucks, it is clear that challenges related to supply chains and processing delays have played a significant role.

The Impact of the UAW Strike on Ford: A Closer Look

The ongoing United Auto Workers (UAW) strike has taken a toll on the automotive industry, impacting various aspects of production and sales. With approximately 16,600 Ford workers participating in the strike, which commenced on September 15, the consequences have been far-reaching. In fact, the strike has expanded multiple times, with the latest disruption occurring at Ford's Kentucky Truck Plant, known for manufacturing their renowned super-duty trucks such as Broncos and Explorers. As a result of these developments, around 2,500 additional UAW workers have been laid off due to the strike-induced disruptions within the production system.

A combination of factors has potentially contributed to this situation. The slowing economy has played a role, particularly affecting businesses that heavily rely on truck purchases. With the U.S. manufacturing economy experiencing eleven consecutive months of contraction, it is evident that truck sales have not been immune to this downturn. Moreover, financing new vehicle purchases has become more expensive, with the average interest rate rising by about 3 percentage points over the past 18 months. These cost implications have further deterred potential buyers.

One specific disappointment stemming from this disruption is evident in the 2023 Lightning sales. While it is crucial to note that sales numbers alone do not necessarily determine who is to blame for underperformance, investors will require additional time to fully unravel the intricate web of causes behind the flat F-150 sales. It is safe to say that the UAW strike has become a significant concern for investors who closely monitor industry developments. Consequently, this unease has translated into notable declines in the stock prices of Ford and General Motors (GM) over the past three months. As of now, Ford stocks have experienced a decline of approximately 21%, while GM stocks have been down by around 27%. In comparison, the S&P 500 has witnessed a milder decrease of about 4%.

Interestingly, Stellantis (STLA) seems to have fared comparatively better amidst the strike-induced chaos. The global nature of the company, coupled with its more affordable shares, has led to a stock increase of approximately 4%. Trading at less than four times the estimated 2024 earnings, Stellantis seemingly provides a more promising investment proposition. Comparatively, Ford and GM stocks trade at less than seven and five times, respectively.

While the full consequences and long-term effects of the UAW strike on the automotive industry are yet to be determined, it is evident that its impact has already had significant ramifications for multiple stakeholders. As the situation continues to evolve, investors and industry observers eagerly await further insights into this ongoing saga.