Cramer urges investors to stick with Ford, even as latest strike risks denting profits

Published Thu, Oct 12 20232:22 PM EDT

The United Auto Workers' unexpected strike at Ford Motor's (F) biggest factory could result in a major blow to the automaker's profitability if the facility remains shut down for a prolonged period. Still, this is not a time to drop Ford, as we expect an eventual agreement between the union and the Big Three Detroit automakers. Around 8,700 Ford workers Wednesday evening walked off the job at the automaker's Kentucky truck plant — its largest and most profitable globally — after the UAW said Ford refused further concessions in contract bargaining. The union had last month ordered strikes at two other Ford assembly plants, as well as factories operated by Chrysler parent Stellantis (STLA) and General Motors (GM). Shares of Ford tumbled roughly 2.4% Thursday afternoon, to just below $12 apiece. The situation has "taken a very bad turn," Jim Cramer said Thursday. "If Ford takes the deal that Fain wants, there'll be thousands of layoffs," he argued. At the same time, Jim urged investors to stick with the automaker. "I still believe that there will be a resolution." The Club also thinks the company could become more profitable if it doubles down on hybrid vehicles and internal-combustion-engine trucks, as Ford continues to see losses at its electric-vehicle unit . "Ford has not gotten the message," Fain said Wednesday in a statement . "It's time for a fair contract at Ford and the rest of the Big Three," he added. Fain, who since March has declared "war" on the Big Three automakers, has called for a 46% increase in base salaries, pension increases and a 32-hour work week. Ford was apparently caught off guard by the strike at its Kentucky plant, which generates $25 billion in annual revenue, roughly a sixth of the company's global automotive revenue. The factory produces Ford Super Duty pickup trucks and the Ford Expedition and Lincoln Navigator SUVS. For its part, Ford called the UAW's decision "grossly irresponsible but unsurprising," according to a statement released Wednesday. The UAW strikes have now impacted 35.5% of Ford's total production, according to Bank of America. The bank said that work stoppage at the Kentucky truck plant could dent Ford's earnings before interest and taxes (EBIT) by $247 million a week, or 5 cents-per-share. The firm's 2023 EBIT estimate is $10.7 billion, with earnings-per-share of $1.96. "We see this move from the UAW as concerning given that Ford gave the largest concessions to the union among the Detroit Three," analysts at BofA wrote in a research note Thursday. "It is possible, however, that since Ford has been the most accommodating, the UAW might believe it can obtain additional concessions by increasing the pressure," they added. Ford, in its statement Wednesday, said it has already offered hourly workers 15% guaranteed combined wage increases and lump sums, and "improved benefits over the life of the contract." Meanwhile, Wells Fargo on Wednesday predicted that the "escalation is a sign that the UAW could be close to a contract proposal with Ford in the next 1-2 weeks." (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.

Factory workers and UAW union members form a picket line outside the Ford Motor Co. Kentucky Truck Plant in the early morning hours on October 12, 2023 in Louisville, Kentucky.

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