Ford experiences financial loss due to a projected $2 billion impact from tariffs anticipated by 2025
Ford Faces $2 Billion Operating Profit Loss Due to US Tariffs in 2025
Ford Motor Company is bracing for a significant financial impact as a result of the US-imposed tariffs on automobiles and auto parts. The company expects a reduction of approximately $2 billion in its adjusted annual operating profit in 2025, according to recent reports.
This expected loss has led Ford to lower its full-year operating income forecast to a range of $6.5 billion to $7.5 billion, down from the prior outlook of $7 billion to $8.5 billion. This represents a potential decline of up to 36% compared to prior estimates and last year's $10.2 billion earnings.
The tariffs, which include a 15% levy on imports from Japan and the European Union, 50% on steel and aluminum, and 25% on parts and vehicles from Canada and Mexico, have increased Ford’s costs and put it at a competitive disadvantage versus foreign automakers.
In response, Ford executives have been engaged in ongoing constructive discussions with the U.S. administration, aiming to ensure a more level playing field due to Ford’s identity as the "most American automaker." CFO Sherry House has emphasized optimism but acknowledged the need for continued efforts to manage the tariff impact.
Ford is also seeking greater relief for imported parts for vehicles assembled in the United States. The company estimates the second-quarter impact from tariffs to be about US$800 million.
Despite these challenges, Ford reported robust sales of popular truck models and strong demand for new sport utility models in the second quarter. Revenues for the company increased by 5% to US$50.2 billion in this period. However, the company reported a second-quarter loss of US$36 million, compared to profits of US$1.8 billion in the prior year.
This loss was attributed to one-time costs related to vehicle recalls and the cancellation of an electric vehicle programme. The current tariff on autos imported from Mexico and Canada is 25%.
Ford CFO Sherry House described the company as being in "near daily" communication with the White House. President Donald Trump has announced tariffs on other countries and key materials like steel. Following agreements with Japan and the European Union, imports of finished cars from these regions are set at 15%.
Ford continues to have "very constructive conversations" with the White House to ensure a level playing field for the company. Japanese producers have a "substantial structural advantage" over Ford, according to Ford CFO Sherry House. Ford shares fell 2.9% in after-hours trading following the announcement of the reduced profit forecast.
In summary, Ford is facing a significant financial challenge due to the US tariffs, with a projected loss of $2 billion in operating profit for 2025. The company is actively engaging with the government to seek relief or adjustments and is working strategically to mitigate the tariff disadvantages. The company's discussions with the White House are focused on ensuring a level playing field for Ford in the competitive automotive market.
- Ford is actively seeking greater relief for imported parts used in vehicles assembled in the United States, as the current tariffs have increased Ford's costs and created a competitive disadvantage compared to foreign automakers, particularly those in Japan.
- In Malaysia's context, the Finance industry could potentially be affected if Ford's financial instability persists, as the company is a significant player in the global automotive industry and any major losses could impact world market trends, which in turn could affect Malaysia's own auto industry and economy.
- Despite the challenges posed by tariffs, Ford has reported robust sales in the second quarter, particularly in popular truck models and new sport utility vehicles, indicating a strong demand for these types of vehicles in the transportation industry. This demand could potentially create opportunities for collaboration or partnerships in the automotive business, both domestically and internationally.
