To the extent Ford succeeds in limiting the impact of higher tariffs on car prices and a resulting decline in new vehicle sales, it will mitigate any potential drag auto tariffs might have on demand for US-based steel production for cold-rolled coil, galvanized steel sheet, cold-heading quality wire rod and special bar quality steel, according to industry sources.
Ford stated on Monday that it had suspended its earnings guidance in the first quarter due to uncertainty about the impact of auto tariffs, duty offsets, potential retaliatory tariffs, new tax rates and emissions standards that together pose “significant industry risks.”
The company will offer updated guidance when it reports earnings for the second quarter, Farley said.
Ford expects industry pricing for autos to rise by 1-1.5% in the second half of the year, as the company moves away from the employee pricing discounts it has offered buyers since early this year to boost sales and bring down high dealer inventories.
“We’ve seen, obviously, a very strong industry performance through April” with the current seasonally adjusted annual rate (SAAR) of dealer new sales for US automakers at 17.5 million vehicles, Farley said.
Sales volumes are expected to decline to a pace of 15.5 million units per year after the employee pricing ends — a sales pace 500,000 units lower than originally projected, reflecting the impact of higher prices on affordability, the CEO said.
“The important thing around that is timing,” Farley said. “If net pricing changes come from reduced incentive spend [on employee pricing], it could happen more immediately.”
The CEO said Ford’s “footprint advantage [in US-based parts production] offers us added flexibility to the changing market dynamic.”
With a 56-day supply in stock, “our current inventory levels allow us to be more opportunistic in the market, and if we find an opportunity to go for share, we will, if it’s profitable,” Farley said.
Course correction
Ford’s tariff exposure is helped by the fact 80% of the parts it uses to make its vehicles are compliant with the United States-Mexico-Canada Agreement (USMCA) and thus free of tariffs, chief operating officer Kumar Galhotra said.
“We are assessing where there are near-term resourcing actions to increase US content in our vehicles,” the COO said. “We have stopped exporting vehicles to China, but we do continue to leverage China as a vehicle export hub to regions like [southeast Asia], Australia, South America and others where trade relations remain favorable.”
“Looking ahead…we are looking for opportunities where it makes sense to develop local supply chains,” he said.
Galhotra said Ford has been on a “course correction” in adding manufacturing capacity in the US since 2020, adding $50 billion in capacity in five years.
“We have a lot of investments in-flight, including manufacturing and battery capacity in Tennessee, battery capacity in Kentucky and Michigan and manufacturing capacity in Ohio.”
Tariff exposure
Chief financial officer Sherry House provided more details about Ford’s tariff exposure.
The estimated $2.5 billion exposure to tariffs is divided roughly in half between parts and imported vehicles.
The exposure to parts is exclusive of steel and aluminium, according to the CFO.
“In fact, 85% of our steel is already purchased domestically in the US, and all of our sheet aluminium,” House said.
Over 50% of Ford’s exposure to tariffs on auto parts is already hedged, with the remaining exposure on the export of powertrains to Ford’s operations in China.
The exposure to tariffs is mitigated by US President Donald Trump’s recent order providing 3.75% offsets against Ford’s exposure for up to 15% of the value of vehicles assembled in the US for one year starting on May 3.
The offset will fall to 2.5% from May 1, 2026, to April 30, 2027, for up to 10% of the value of vehicles assembled in the US.
Galhotra said Ford has taken other steps to reduce its tariff exposure.
“Vehicles shipped to Canada from Mexico via the US are now transported on bonded carriers, so they aren’t subject to US tariffs. We’ve done the same for parts that merely pass through the United States,” the COO said.
Earnings
Ford reported net revenue of $40.7 billion in the first quarter, with a net income of $471 million and adjusted earnings before interest and taxes (EBIT) of $1 billion.
“We had our best first-quarter US pickup sales in over 20 years and we delivered sequential share growth in our home market,” Farley said.
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