On May 5, 2025, Ford Motor Company suspended its annual guidance for stakeholders due to the rising uncertainty created by Trump's tariffs. As per the authorities, the current tariffs would levy the company with a loss of nearly USD 1.5 billion in adjusted earnings before interest and tax. Is it the beginning of the automobile industry's decline or rise?
Image source: Yallamotor.com
After the closure of the US stock trading sessions, the company's share was deemed to fall about 2.3 per cent in the after-hours trading session. In addition to this, the imposed tariff by Trump is determined to increase the overall cost for the year by more than USD 2.5 billion. The majority of the cost would be incurred while importing the automobiles from countries like China and Mexico. As of now, the company has stopped its exports to China, except for importing vehicles like the Lincoln Nautilus.
Ford has reported numerous strategies and actions, and the company has been able to make about USD 1 billion. One of the key strategies behind it was to discontinue transporting vehicles from Mexico to Canada by using bonded carriers, eliminating the need to incur tariffs.
Reality is far from strategy: Ford's take on Trump's tariff 3 months ago
As expressed by the CEO of Ford, the imposed tariffs would ease the impact on the automakers, suppliers and consumers. However, he also states that it is crucial to work closely with the administration for the imposed tariffs for the envisioned growth within the industry.
Moreover, he also marks the tariffs to be "essential" to encourage higher export rates for the US. Not only this, he further adds that this shall create domestic job opportunities and incur affordable parts, ensuring the effective promotion of domestic growth and affordable vehicles within the country.
With this, the company's course of action includes increasing nearly 4 million vehicles each year, 15 additional manufacturing plants and a total of 500,000 manufacturing jobs.
Back in 2024, when the company faced a loss of USD 5 billion, they had planned to increase their global volume which would be driven by the year-long impact of European launches. They further also planned to increase their investment in their battery facilities and next-generation products in the next two years. However, the reality is actually far from the reality.
Offsetting cost impact
With the final tariffs imposed on May 3, Ford's earnings per share shall witness a decline of nearly 14 per cent in the first quarter itself. This amount will surpass the London Stock Exchange Group of Companies (LSEG) analyst's estimate of 2 per cent.
In the first quarter of 2025, the company's net income dropped to USD 471 million. If compared with the previous year, the company had incurred an income of USD 1.3 billion, indicating a fall of approximately 63.85 per cent.
The company's revenue fell by 5 per cent to USD 40.7 billion in the same quarter. However, it is below the expected fall of USD 36 billion. This had been recovered with robust earnings as consumers wanted to buy cars before the overall price rises.
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