Ford sees sharp profit drop as Trump tariff, EV threats loom

FORD Motor warned that profit may fall by US$2 billion or more this year on an expected drop in vehicle prices and costly new-model launches, adding to risks posed by potential steep new tariffs under US President Donald Trump and dimming electric vehicle (EV) prospects.

The second-largest US automaker on Wednesday (Feb 5) said earnings before interest and taxes will fall to a range of US$7 billion and US$8.5 billion, down from the US$10.2 billion profit it generated in 2024. Sherry House, Ford’s incoming chief financial officer, told reporters that earnings will drop this year due to industrywide prices falling by about 2 per cent and the cost of launching the new Lincoln Navigator and Ford Expedition SUV, which will result in a “breakeven” first quarter.

House said Ford’s guidance does not include the potential impact of policy changes by the Trump administration.

“I know tariffs are on everyone’s mind,” House said. “There is no question that 25 per cent tariffs on Mexico and Canada would have a major impact on our industry. That said, we believe the Trump administration intends to support the American auto industry.”

Ford’s shares fell more than 5 per cent as at 4.07 pm after regular trading in New York.

The forecast underscores the challenges facing chief executive officer Jim Farley as he overhauls Ford’s EV strategy to staunch losses and trim warranty repair expenses that have hurt profit. Farley and rival automakers are also contending with the threat posed by Trump’s moves to levy steep new tariffs and his pledge to gut federal support for plug-in cars, such as a US$7,500 buyer tax credit that dealers see as crucial to selling battery powered models.

Ford lost a record US$5.1 billion on EVs last year, and predicted the deficit could widen to as much as US$5.5 billion this year.

Farley is pushing to produce more affordable models that go farther on a charge, but those new offerings will not arrive until 2027. The tumult has put pressure on Ford shares, which fell nearly 19 per cent last year, while the stock of rival General Motors soared 48 per cent.

Ford, America’s most recalled automaker, has struggled to reduce high warranty costs that Farley has said contribute to a US$7 billion to US$8 billion cost disadvantage compared to rivals. He has told executives that their performance bonuses are riding on successfully closing that gap. House said the company is targeting US$1 billion in cost cuts this year.

“In 2025, we expect to make significantly more progress on our two biggest areas of opportunity – quality and cost,” Farley said. “We control those key profit drivers, and I am confident that we are on the right path.”

Ford’s fourth-quarter adjusted profit was 39 US cents per share, topping the 32 US cents analysts expected on average. For the full year, Ford reported earnings before interest and taxes of US$10.2 billion, just above the US$10 billion the company had forecast. Ford began 2024 by predicting it would earn as much as US$12 billion on that basis. BLOOMBERG