Ford Sees Profit Drop With Tariff Tab Rising To $2 Billion

Ford Motor Co. warned profit this year will see a sharp drop on the growing fallout from President Donald Trump’s tariffs, underscoring the dramatic policy shifts in Washington that are upending the global auto industry.

The Dearborn, Michigan-based automaker forecast adjusted earnings before interest and taxes this year will fall by as much as 36%. That’s in large part due to a net tariff impact of $2 billion, about $500 million more than the company expected previously.

It’s the latest example highlighting how automakers are being whipsawed by Trump’s policies. US tariffs on imported vehicles, auto parts, steel and aluminum – as well as goods from key US trading partners – have ballooned costs for Ford and its rivals. Ford is still facing stiff – and growing – tariff costs even though the company makes more automobiles in the US than any other carmaker.

At the same time, the Trump administration’s moves to unwind stringent tailpipe pollution regulations represent a potentially significant boost for Ford and its Detroit rivals, freeing them to sell highly-profitable gas-guzzling SUVs and pickups. Taken together, those policy shifts herald a long-term shift away from a globalized auto industry, Ford Chief Executive Officer Jim Farley said.

“We increasingly see Europe, North America and Asia becoming kind of regional businesses,” Farley said Wednesday on the automaker’s earnings call. “I believe this is quite a fundamental change.”

Farley said the Trump Administration’s recent trade deal with Japan to lower tariffs to 15% from 25% has handed competitors such as Toyota Motor Corp. a large cost advantage over Ford, when Japan’s lower labor and currency costs are factored in. Ford’s Kentucky-built Escape crossover faces a roughly $5,000 cost disadvantage to a Toyota Rav4, and as much as a $10,000 handicap between a Japan-built 4Runner SUV compared to a Ford Bronco made in Michigan, he said.

“It’s really meaningful,” Farley said in a Bloomberg TV interview. The company is working with the Trump administration “to minimize our tariff expense so that we can get more competitive.” He told analysts on a conference call that Trump’s tariff’s “feel kind of long term.”

Ford’s shares fell 2.4% in after-hours trading on Wednesday. The stock has gained about 10% this year compared with the S&P 500 Index’s roughly 8% advance.

The larger tariff hit Ford now expects stems in part from Trump’s decision to double steel and aluminum levies to 50% from 25% previously, Chief Financial Officer Sherry House told reporters. Those duties impact Ford because they raise costs for its material suppliers, which in turn pass those expenses on to the carmaker.

Another factor pushing up costs are tariffs imposed to curb the flow of fentanyl into the US. Those tariffs have stayed higher for longer than Ford expected, House said.

“The administration is aware of these multiple tariffs and is working with with us to get this right,” House said.

Ford’s tariff tally is just the latest to highlight fallout that volatile US trade policies have created in the auto industry. General Motors Co. last week said tariffs cut its second-quarter earnings by $1.1 billion, part of an expected a $4 billion to $5 billion impact GM expects for the full-year. Jeep-maker Stellantis NV on Tuesday said import taxes will reduce earnings by about $1.7 billion this year.

Profits have taken a hit as automakers have largely refrained from broad price increases to offset higher costs from tariffs. House told reporters the company expects vehicle pricing to be flat through the rest of the year.

Ford’s warning largely overshadowed a second-quarter profit that beat Wall Street expectations. Adjusted earnings were 37 cents a share in the period, better than the 33 cents analysts expected on average. Adjusted EBIT of $2.1 billion also topped estimates.

Ford Blue, the automaker’s traditional business that includes internal combustion engine vehicles and gas-electric hybrids, earned $661 million before interest and taxes in the second quarter, roughly half the the $1.2 billion it generated a year earlier. Ford’s US vehicle sales soared 14.2% in the quarter, as the company offered an employee-pricing-for-everyone discount program.

The automaker’s Ford Pro commercial business, which has been a bright spot, earned $2.3 billion before interest and taxes, down from $2.6 billion in last year’s second quarter.

Ford’s electric vehicle unit, Model-e, lost about $1.3 billion in the quarter, a larger deficit than the roughly $1.2 billion Ford lost on battery powered models during the same period last year. Ford’s US EV sales plunged 31% in the quarter, as its models age and it temporarily halted sales of the electric Mustang Mach-e due to a safety recall. Ford has forecast that it could lose as much as $5.5 billion on EVs this year.

Farley said on Wednesday’s conference call that the company will reveal an updated EV strategy at an Aug. 11 event in Kentucky, including plans for “a breakthrough electric vehicle.”

“This is a Model T moment for us at Ford,” he said.

He also sees a big opportunity for Ford to get into the robotaxi business as a service provider for driverless vehicles.

“We really feel like the fleet management opportunity is a big upside for Ford Pro,” Farley said of the growing network of robotaxis.

Farley also is struggling to rein in a rash of recalls that has reached record levels. Ford is scrambling to improve quality and to lose its distinction as the most recalled automaker in America. The company took at $570 million charge in the second quarter to cover the cost of recalling nearly 700,000 sport-utility vehicles for a flaw that could cause engine fires.