American multinational automaker Ford Motor Company is under increasing pressure from trade changes as it re-estimates the 2025 forecast. They announced tariffs will affect future profits by USD 3 billion, up by USD 0.5 billion from the previously announced USD 2.5 billion. The automaker's Station-B-related expenses were USD 800 million in the second quarter, leading Ford to post its first quarterly loss in nearly three years.
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The adjusted EBIT for 2023 is now expected to fall between USD 6.5 billion and USD 7.5 billion (down from between USD 7 billion and USD 8.5 billion from its February guidance), and Ford management continues to monitor and take advantage of opportunities for improvements to the current EBIT range.
Strategic missteps meet policy shock
Ford’s exposure is mainly due to its dependence on imported parts, especially aluminium and steel, that are now subject to 50 per cent tariffs under Trump's recent trade enforcement actions. The irony is particularly significant to Ford, in that it claims to be the “most American car company”, producing 80 per cent of its vehicles in America. As it pertains to imports, they still require some key grades of aluminium, which are still imported, and the majority of that comes from Canada. Ford is in a precarious position.
Chief Financial Officer Sherry House acknowledged ongoing efforts to manage the crisis: “They’ve [Trump administration] made it clear that Ford, as the most American automaker, should not be disadvantaged,” she said, adding that there are “constructive conversations” with Washington focused on easing tariffs for steel and aluminium.
Supply chain pivoting: but at what cost?
In order to mitigate the financial drag, Ford has taken evasive manoeuvres, stopping exports to China, finding alternate logistics routes such as using bonded carriers to reroute vehicles, etc. If estimates are correct, these efforts will save about USD 1 billion, but they do not really address the bigger issue, which is material dependency. Ford is heavily dependent on imported materials for its lightweighting strategy, particularly aluminium, which is critical for its electric vehicles and hybrids.
Despite its domestic production advantage over GM and Stellantis, Ford’s EV ambitions have made it more susceptible. This vulnerability is worsened by new executive orders enforcing a 25 per cent blanket tariff on auto parts, with limited relief available through recent “destacking” measures.
Consumer costs and future uncertainty
Ford has opened its employee pricing to the public and apparently forewarned customers about price increases on hybrids and EVs. Simultaneously, it has suggested to its dealerships cuts in fleet incentive payments, indicating a behavioural shift in its consumer value proposition. EBIT is already down 63.85 per cent year over year, and revenues fell back 5 per cent to USD 40.7 billion, and the cracks are widening.
Going forward, Ford's hope relies on obtaining tariff exemptions or additional offsets through lobbying. In the meantime, industry watchers believe these tariffs may break up the company's expansive growth ambitions, including their investments in battery plants and with models from the next generation.
Also read: India dethrones China in US smartphone exports, but the real story is aluminium
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