Ford Withdraws Forecast, Anticipates $1.5 Billion Impact from Trump Tariffs

DETROIT: On Monday, Ford Motor halted its yearly forecast due to uncertainty regarding U.S. President Donald Trump's tariffs, stating that the duties would result in approximately $1.5 billion in adjusted earnings before interest and taxes for the company. "Ford CEO Jim Farley told analysts on Monday night that it remains too soon to completely grasp how our rivals are reacting to these tariffs." "Nonetheless, it is evident that in this new landscape, manufacturers with the most significant presence in the U.S. will possess a considerable edge," Ford announced its results after the conclusion of the U.S. stock trading day, and its shares dropped roughly 2.3 per cent in after-hours trading. According to Ford executives, the tariffs are anticipated to increase overall costs by $2.5 billion for the year, primarily due to expenses associated with importing vehicles from Mexico and China. The car manufacturer halted car exports to China, but continues to import vehicles such as its Lincoln Nautilus from there.

Company leaders stated that they have managed to cut approximately $1 billion of that expense through several measures, such as using bond carriers to move vehicles from Mexico to Canada, thereby avoiding U.S. tariffs. In February, the automaker from Dearborn, Michigan, estimated earnings before interest and taxes to be between $7.0 billion and $8.5 billion for the year 2025. That prediction did not consider tariffs. The Chief Financial Officer of the automaker, Sherry House, indicated that it was set to achieve that guidance, not accounting for the repercussions from tariffs. Although competitors like General Motors recently issued revised forecasts, Ford executives announced they have halted the company's outlook until they gain better insight into the impact of retaliatory tariffs and how consumers might respond to rising prices.

"It’s a daring decision for them to retract guidance when GM provided updated guidance incorporating tariffs, although to be honest, the situation is quite uncertain," stated Morningstar Research analyst David Whiston. Ford's earnings per share dropped to 14 cents in the first quarter, greatly exceeding LSEG analysts' prediction of 2 cents per share but down from 49 cents the previous year. Executives stated that enhancements in cost and quality enabled Ford to exceed expectations. Earlier this year, the car manufacturer had cautioned that first-quarter outcomes would be impacted by production interruptions linked to product introductions at various facilities. Net income dropped significantly to $471 million compared to $1.3 billion the previous year. Ford's revenue decreased by 5 per cent to $40.7 billion for the quarter, surpassing the anticipated $36 billion. Profits increased as buyers hurried to purchase cars, fearing that tariffs would cause prices to rise. Ford was among the select automakers that offered incentives to capture market share during this purchasing surge.

ALSO READ: Ather Energy shares make subdued market debut, list at 2% premium to IPO price on NSE

According to some estimates, Trump's 25 per cent tariffs on auto imports were anticipated to increase costs for U.S. automakers by over $100 billion this year. Last month, the president granted a reprieve on tariffs imposed on automotive components, offering auto manufacturers credits of up to 15 per cent of the value of vehicles produced domestically, along with exemptions from additional duties. This month, GM lowered its profit outlook and indicated that tariffs were projected to cost it as much as $5 billion.  "According to Barclays analysts, investors favour Ford over GM because Ford has a significantly greater proportion of U.S. sales that are manufactured domestically," highlighting that Ford assembles 79 per cent of its U.S. sales in the country compared to GM's 53 per cent. The maker of Jeep, Stellantis, has also halted its forecasts because of uncertainties surrounding tariffs. In addition to challenges from Trump's trade policy, Ford is experiencing substantial losses with its electric vehicles.

This year, the automaker anticipated losses reaching as high as $5.5 billion from its electric vehicle and software activities. It has incurred losses exceeding $10 billion since the year 2023. Reuters exclusively revealed that Ford halted a costly initiative to create a new electrical architecture for its cars known as FNV4, as delays and rising costs obstructed its progression. When inquired about the report, Farley stated that the action represents "a highly meaningful saving for capital efficiency." Ford Pro, the firm's successful commercial vehicle division, reported first-quarter earnings of $15.2 billion, a decrease of 16 per cent compared to the previous year. Ford's gasoline-engine segment reported quarterly earnings of $21 billion. Its Model e segment, encompassing software and EV initiatives, generated revenue of $1.2 billion over the three-month period.