06-05-2025
Tariff Battle with China Already Impacting Supply Chain for Ford
Ford previously announced it will not raise sticker prices on new cars and trucks as an offset for tariffs, though industry prices are expected to rise as incentives disappear.
Sourcing rare earth materials 'has become rather complicated in the last few weeks,' an executive said, and 'it would take only a couple' of such component materials to disrupt production of certain models.
Ford claims to be number one in vehicles assembled in the US, employing the most US hourly autoworkers and exporting more US-assembled vehicles to other markets (see Mustang).
Trump administration tariffs on imported vehicles and parts will cost Ford $2.5 billion gross and $1.5 billion net earnings before interest and taxes (EBIT) this year, CEO Jim Farley told Wall Street analysts in the automaker's first-quarter earnings call on Monday.
Bolstered by Ford's claims that it has more domestic production in the US than any other automaker, its anticipated tariff hit is better than the $4 billion cut in profits General Motors expects to suffer this year.
Ford previously announced it will not raise sticker prices on new cars and trucks as an offset for tariffs, though industry prices are expected to rise as incentives disappear and average transaction prices spike upward.
But employee pricing has been extended to mitigate sticker shock for consumers, Farley said. The company's current inventory level is 56 days' supply on dealer lots, which is about normal for US automakers, though slim enough for Ford and Lincoln dealerships to meet demand near-term.
Unlike GM in its call last week, Ford executives said they will not issue fiscal year 'guidance' for full-year 2025, though the company said its sales levels are tracking with the $7 billion to $8.5 billion adjusted EBIT it projected in its fourth-quarter/full-year 2024 earnings call last January. Ford posted adjusted EBIT of $10.2 billion in 2024.
Ford reiterated its position as number one in vehicles assembled in the US, by volume, employing the most US hourly autoworkers and exporting more US-assembled vehicles to other markets (see Mustang).
The tariffs are prompting Ford to ship vehicles assembled in Mexico for Canadian customers on bonded carriers to avoid the tariffs, said Kumar Gulhotra, chief operating officer, and it has stopped exporting from the US to China.
'Nearly 80% of parts in the US are USMCA compliant,' Gulhotra said, referring to the US-Mexico-Canada trade agreement President Trump negotiated during his first administration. 'But we're looking at improving the US supply chain.'
Gulhotra warned of a potential problem developing recently over the Trump administration's trade war with China.
Tom Murphy
Bringing in rare earth materials 'has become rather complicated in the last few weeks,' he said, and 'it would take only a couple' of such component materials to disrupt production of certain models, due to volume and pricing implications.
Ford reported first-quarter adjusted EBIT of $1 billion, down 63%, from $40.7 billion in gross revenue, a 5% drop.
Ford's commercial truck business continues to keep the lights on, as Pro posted an EBIT of $1.3 billion last quarter despite planned downtime at the Kentucky truck plant, according to Sherry House, chief financial officer.
Ford has better than 40% share of the Classes 1-7 truck market in the US, and Pro's 675,000 paid software subscriptions represent a 20% increase year-over-year.
Pro's profit was partially offset by an $800 million loss for Model e although the automaker said it continues to find cost savings in electric-vehicle development.
Ford Blue, like most other auto brands, had strong first-quarter sales as new vehicle buyers rushed to beat tariff pricing, and Ford's mainstream ICE/hybrid consumer vehicle unit earned a 'modest profit' of $100 million, House said.
How long can Ford sustain losses with its all-electric Model e business unit before difficult decisions must be made? Please comment below.
