Ford Motor Company F is reportedly struggling with contract negotiations with the United Auto Workers (UAW) union, hinting that it may have hit its maximum limit for financial concessions.
Ford’s shares experienced a 2% drop on Thursday, bringing an end to a four-day streak of gains. The previous day, the stock reached a peak of $12.39 per share but fell short of surpassing the 55-day moving average. This moving average has proven to be a formidable resistance level since late July.
Back in September 2023, Ford’s shares underwent what is known as a “death cross” when the 55-day moving average crossed below the 200-day moving average. This occurrence signaled a bearish shift in the stock’s major trend.
Before September 2023, Ford’s shares encountered a similar “death cross” in April 2022, which persisted until early July 2023. During that period, the stock experienced a maximum drawdown of 36%.
What Happened: Ford, the iconic automaker, has found itself “at the limit” in terms of what it can offer the UAW, as indicated by Kumar Galhotra, president of Ford’s traditional operations, during a media and analyst call on Thursday. Galhotra, as quoted by CNBC, emphasized that any additional costs would pose a risk to the company’s future operations and investments, especially in burgeoning sectors such as electric vehicles.
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The statement was made following a sudden strike initiated by the union at Ford’s SUV and pickup truck plant in Kentucky. This strike, which took Galhotra by surprise, unfolded during ongoing contract talks that affect nearly 57,000 U.S. workers.
Although Galhotra refrained from revealing the financial impact of the company’s current proposal to the union, he underscored that “any further moves would impede our capacity to invest into the business as needed.”
Why It Matters: This issue surfaces at a critical time when the automaker is striving to balance its traditional operations while investing in emerging sectors, such as electric vehicles. The financial constraints presented by the contract negotiations could potentially impede Ford’s future growth and innovation strategies, thus having a significant impact on the company’s market position.
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