Ford Boosts 2025's Anticipated Tariff Charge by $500 Million
Ford Motor Co. is navigating the challenges posed by the Trump administration's tariff policies by shifting its focus towards domestically produced trucks and niche products [1]. This strategy, which emphasizes U.S. manufacturing, aims to reduce tariff exposure as around 80% of Ford's vehicles are made in the U.S., although the company still imports parts globally [3].
The financial impact of tariffs has been significant for Ford. The company now expects a net tariff-related expense of approximately $2 billion in 2021, up from a previous estimate of $1.5 billion [1]. Around $800 million of these costs were reflected in the second quarter's earnings before interest and taxes (EBIT), contributing to a 22% decline in EBIT to $2.1 billion [1]. The electric vehicle (EV) segment, in particular, suffered an operating loss widening to $1.3 billion due to tariffs and ramp-up costs for new battery plant investments [2].
CEO Jim Farley is actively engaged in constructive discussions with the Trump administration to potentially reduce tariff exposure, particularly on imported parts [1][3]. However, Ford does not anticipate major changes to its vehicle model lineup due to its current U.S.-focused manufacturing strategy.
In a move to compete in the global EV market, Ford is investing in new U.S.-based EV platforms [2]. The company will unveil its first electric vehicle from its skunkworks program in California on August 11 [6]. These new EVs, designed by the skunkworks team, will be cheaper and offer only a handful of models [7].
Ford's commercial-vehicle division, Ford Pro, is also seeing growth. Ford Pro's software offerings have seen a 24% increase in paid subscriptions this spring, reaching 757,000 [5]. Ford Pro's revenues are on pace to hit nearly $70 billion this year [4]. The division is expected to receive more growth capital in the coming years.
Alicia Boler Davis, a former General Motors and Amazon executive, has been appointed as the president of Ford Pro, effective October 1 [8]. Under her leadership, Ford Pro aims to continue its growth trajectory.
In the second quarter, Ford wholesaled nearly 1.19 million vehicles, a 4% increase from the same period last year [9]. Despite a 22% drop in EBIT, Ford's revenues, adjusted for one-time charges, still increased [10].
Shares of Ford (Ticker: *F*) were up nearly 2% to $11.06 in midday trading the morning after executives published earnings [3]. Over the past six months, Ford's shares have climbed roughly 10%, growing the company's market capitalization to about $44 billion [11].
In conclusion, Ford is adapting to the tariff environment by focusing on U.S. manufacturing and investing in new EV platforms. Despite the challenges, the company continues to see growth in its commercial-vehicle division and wholesale vehicle sales. The upcoming electric vehicle unveiling and the appointment of Alicia Boler Davis as the president of Ford Pro are signs of Ford's commitment to long-term strategic responses to the tariff environment.
References: 1. Ford to Mitigate Tariff Costs by Focusing on Domestically Made Trucks and Niche Products 2. Ford to Unveil First Electric Vehicle from Skunkworks Program 3. Ford Shares Up Nearly 2% After Executives Publish Earnings 4. Ford Pro's Revenues on Pace to Hit Nearly $70 Billion This Year 5. Ford Pro's Software Offerings See Growth with Increased Paid Subscriptions 6. Ford to Unveil EV on August 11 7. New Ford EVs to be Cheaper with Fewer Models 8. Alicia Boler Davis Appointed as President of Ford Pro 9. Ford Wholesales Nearly 1.19 Million Vehicles in Second Quarter 10. Despite 22% Drop in EBIT, Ford's Revenues Adjusted for One-Time Charges Still Increased 11. Ford's Shares Climb Roughly 10% Over Past Six Months 12. Trump Administration's Tariff Policies to Cost Ford Motor Co. Approximately $2 Billion Net This Year 13. Ford Still Has Opportunities to Trim the Tariff Exposure in its Parts Purchasing 14. Ford's Estimate of the Cost due to Tariff Policies was $1.5 Billion Three Months Ago
- Ford's strategy to reduce tariff exposure includes a focus on sports such as U.S. manufacturing and investing in new electric vehicle platforms, aiming to compete in the global EV market.
- Despite the tariff environment, Ford continues to see growth not only in wholesale vehicle sales but also in its commercial-vehicle division, with Ford Pro's revenues on pace to reach nearly $70 billion this year.
