Stellantis STLA-N said on Tuesday it would seek to offset a significant financial hit from strikes in North America that led to big pay increases, including looking at potential cost cuts.
Unions’ coordinated strikes in the United States and Canada, which started last month and expanded in October, are ending this week after tentative agreements that won record salary increases for workers at the Detroit Three automakers.
Stellantis CFO Natalie Knight said the six-week strikes were unexpectedly long and would cost the group in the full-year 2023 less than 750 million euros ($800 million) in terms of profitability and around 3 billion euros in terms of revenue.
Stellantis, however, did not provide estimates on extra labor costs it will have to bear in the future, following new agreements with unions in North America.
Presenting its third quarter sales result, the owner of brands including Peugeot Jeep and Ram confirmed its full year forecast for a double-digit margin on adjusted operating profit (EBIT) and positive industrial free cash flow.
Knight said during an analyst call that an 11% EBIT margin for the full year was “definitely” conservative and she was confident the group would pass the 8 billion euro synergy mark in 2023.
Shares in the world’s third largest automaker were up 3.6% by 1515 GMT, outperforming Italy’s blue-chip index.
“Obviously the impact in 2023 is a significant one and I don’t want to suggest you’ll see that fully mitigated … but I think you will see big moves on our side,” Knight said, replying to questions over actions the group will take, including cost cuts, to make up for the strike hit.
“We’re looking at everything in terms of where should we approach (mitigation actions). And I think you will continue to hear more about that mitigation as we go forward.”
Knight, who started the job this summer, said the 750 million euro hit to profitability would be the smallest among the Detroit Three.
Ford F-N has said it expects the strikes to reduce its 2023 adjusted operating profit by about $1.3 billion while GM GM-N sees an impact of no less that $1 billion.
Stellantis was helped by its lower U.S. exposure compared to its Detroit competitors, with around 50% of its operating earnings coming form the country, versus around 80% for Ford and GM, RBC Capital Markets analyst Tom Narayan said in a note.