Ford Sounds Alarm: $2B Loss from Tariffs Threatens Profits

() — Ford Motor Company stated that its profits this year are expected to experience a significant decline due to the increasing consequences of President Donald Trump's tariffs, highlighting the major changes in Washington policies that are disrupting the automotive sector.

A Detroit, Michigan-based car manufacturer predicts that its adjusted earnings before interest and taxes for this year could decrease by up to 36%. This decline is largely attributed to a net tariff effect costing $2 billion, which is approximately $500 million higher than what the company had anticipated earlier.

This is the most recent indication that car manufacturers are caught between conflicting effects of Trump's regulations. U.S. taxes on foreign cars, automotive components, iron, and aluminum—as well as products from major American trade allies—have significantly increased expenses for Ford and other competitors. Ford continues to deal with high—and increasing—tariff charges despite the fact that the company produces more automobiles more than any other automaker in the U.S.

Meanwhile, the Trump administration's actions to relax strict vehicle emission standards ease tight exhaust emission rules reduce harsh automobile pollution controls loosen rigorous emissions requirements soften tough tailpipe regulation policies modify severe vehicle exhaust guidelines alter rigid motor vehicle emission laws adjust intense pollution control measures for cars moderate strict car emission specifications revise demanding automotive environmental regulations serve as a major advantage for Ford and its Detroit competitors, allowing them to focus on selling high-profit gasoline-consuming SUVs and trucks. Altogether, these regulatory adjustments signal a lasting move away from a globally integrated automotive sector, stated Ford's CEO Jim Farley.

We're seeing more and more Europe, North America, and Asia operating as regional enterprises," Farley stated during the car company's earnings conference call on Wednesday. "I think this represents a significant shift.

Farley mentioned that the new U.S.-Japan trade agreement, which reduces tariffs from 25% to 15%, has provided rivals like Toyota Motor Corporation a significant financial edge over Ford, considering Japan's reduced labor expenses and exchange rates. The Ford Escape built in Kentucky incurs an approximate $5,000 higher production cost than the Toyota RAV4, according to him, and could face up to a $10,000 disadvantage against a Japanese-made 4Runner SUV versus a Ford Bronco manufactured in Michigan.

It holds significant importance," Farley stated in an interview. The company is collaborating with the Trump administration "to reduce our tariff costs in order to become more competitive." He mentioned to analysts during a conference call that Trump's tariffs "seem somewhat long-term.

Ford's stock fell by less than 1% at 7:20 a.m. on Thursday in New York, narrowing a bigger drop after the announcement of its quarterly performance. The share price has risen approximately 10% so far this year, outpacing the S&P 500 Index's increase of around 8%.

Tariff Bill

The bigger tax impact that Ford anticipates partly comes from Trump's choice to double Steel and aluminum tariffs increased to 50% from 25%, as reported by CFO Sherry House to journalists. These taxes affect Ford since they elevate costs for its material providers, who then transfer these additional charges to the automaker.

Other elements contributing to rising expenses include tariffs designed to limit the influx of fentanyl into the United States. These duties have remained elevated for an extended period compared to what Ford anticipated, according to House.

"The administration knows about these various tariffs and is collaborating with us to address them properly," House stated.

Ford's tariff count is the most recent example of the consequences caused by unstable U.S. trade policies within the automotive sector. General Motors Co. stated last week that tariffs reduced its second-quarter profits by $1.1 billion part of an anticipated $4 billion to $5 billion effect that GM anticipates for the entire year. Jeep manufacturer Stellantis NV stated on Tuesday that import duties will lower profits by approximately $1.7 billion this year.

Earnings have been affected because car manufacturers have mostly avoided widespread price hikes to counter rising expenses due to tariffs. House mentioned to journalists that the company anticipates vehicle prices will remain stable for the remainder of the year.

A second-quarter profit that exceeded Wall Street predictions was largely overshadowed by Ford's warnings. The company reported adjusted earnings of 37 cents per share for the quarter, surpassing the 33 cents anticipated by analysts on average. Additionally, adjusted EBIT reached $2.1 billion, which also surpassed forecasts.

Slipping Profits

Ford Blue, the automaker's conventional division encompassing internal combustion engine cars and gasoline-electric hybrid models, reported earnings of $661 million before interest and taxes during the second quarter—approximately half of the $1.2 billion it made in the same period last year. Ford's U.S. vehicle sales increased by 14.2% in the quarter, as the company introduced a pricing strategy available to all employees. discount program .

The automobile manufacturer's Ford Pro marketing division, which has been a bright spot generated $2.3 billion prior to interest and taxes, a decrease from $2.6 billion during the same period last year.

Ford's electric vehicle division, Model-e, reported a loss of approximately $1.3 billion in the latest quarter, which represents a bigger shortfall compared to the roughly $1.2 billion in losses recorded for battery-powered vehicles during the same time frame last year. Ford's U.S. EV sales plunged 31% during the quarter, as its models grew older and it briefly stopped selling the electric Mustang Mach-E because of a safety recall . Ford predicts it may incur losses of up to $5.5 billion on EVs this year.

On Wednesday's conference call, Farley mentioned that the company will unveil a revised electric vehicle strategy during an August 11 gathering in Kentucky, featuring details about "a revolutionary electric car."

"This marks a pivotal point for us at Ford," he stated.

He also believes there is significant potential for Ford to enter the robotaxi industry as a supplier of autonomous vehicle services.

"We truly believe the fleet management potential represents significant value for Ford Pro," Farley stated regarding the expanding network of autonomous taxis.

Farley is also having difficulty controlling a rash of recalls which has hit unprecedented heights. Ford is scrambling to enhance quality and to cease being distinct most recalled automaker in America. The corporation examined itself $570 million expense in the second quarter to offset the costs associated with recalling almost 700,000 sports utility vehicles due to a defect that may lead to engine fires.

--Thanks to Matthew Miller and Tonya Garcia for their help.