Ford Faces $1.5B Tariff Hit

Ford’s Tariff Impact

Ford is dealing with some headaches related to tariffs, with the company estimating that they’ll take a $1.5 billion hit due to these new financial burdens. It’s a blow that seems to stem from U.S. tariffs on imported vehicles and parts, expected to add about $2.5 billion to Ford’s expenses by 2025. However, they’ve managed to slice a billion dollars off this figure with some strategic moves, like shifting vehicles from Mexico to Canada using bond carriers, allowing them to dodge some of these tariffs. In other words, they’re looking to stay competitive even when the deck feels a bit stacked.

For those unfamiliar, bond carriers are transportation companies allowed by customs to transport goods across borders under a customs bond, meaning shipments can enter the U.S. without being hit by customs duties immediately. Unexpectedly, Ford also reduced export activity to China while continuing to use the country as a shipping hub for regions where trade relations are a bit more favorable, like Australia and South America.

2025 Guidance

Ford has pulled back its 2025 guidance for a host of reasons. These include industry-wide supply chain hiccups affecting production, the potential for more or higher tariffs, the idea of retaliatory tariffs from other countries, and an uncertain tax and emission future. They described how the forecasted $1.5 billion tariff issue for 2025 could change as policies evolve. Watching these developments will be crucial since Ford plans to give investors an updated outlook with their Q2 earnings report come summer.

Q1 Performance

In Q1, Ford saw earnings per share drop to 14 cents, a noticeable slip from the previous year’s 49 cents. However, it was still ahead of the grim two-cent-per-share prediction from analysts at the London Stock Exchange Group. Ford’s net income also fell from $1.3 billion to $471 million, and gross revenue dipped by 5% to $40.7 billion; still better than the forecasted $36 billion. Despite the disruptions from launching products across multiple plants, the automaker’s progress on cost-cutting and quality improvements helped weather some of the tariff anxiety. Ford remains on track to achieve $1 billion in net cost reductions for 2025, tariff impacts excluded.

Thoughts

Jim Farley, Ford’s CEO, reiterated how having a significant U.S. footprint could give automakers an edge over tariff challenges, and Ford is keen to use that advantage. However, Ford doesn’t manufacture any sedan or compact car models in the U.S. besides the Mustang, which might surprise some folks. The company acknowledged that a small disruption, say to rare earth material imports from China, could ripple through production lines, not just for Ford but across the industry.

Kumar Galhotra, Ford’s COO, elaborated that these materials are becoming more complicated to bring over since trade complexities began rising, and disruptions could lead to greater challenges down the line. Meanwhile, General Motors also paused its 2025 financial outlook and expects even larger tariff-induced losses, perhaps up to $5 billion.