Now, Ford Motor Company is experiencing a violent whipsaw in its commercial business. In fact, their “Pro” commercial business saw a 5% decline in revenue for the quarter, bringing the total to $15.2 billion. This layoff is an indicator of a much larger story brewing, as the automotive industry continues to respond to currents of new tariffs and other tumultuous market conditions.
That said, it’s no small potatoes, as evidenced by the company’s $1.31 billion in earnings before interest and taxes (EBIT) related to that “Pro” business. This represents a massive drop from the more than $3 billion received during this time last year. This recent downturn underscores the pressures that Ford is under as it pivots to meet new economic realities.
Ford Chief Financial Officer Sherry House emphasized that despite the declines, the company is making progress with its Ford+ turnaround plan. She stated, “Our results in the first quarter show that the Ford+ [turnaround] plan is working.” This statement is indicative of a deeper willingness within Ford to change its business playbook in light of growing external pressures.
We know the automotive industry is going through tremendous pain at this moment. On top of everything, a dramatic 25% tariff on imported vehicles took effect in early April. On top of that, 25% tariffs on auto parts that don’t adhere to the United States-Mexico-Canada Agreement are frying up the landscape. Ford’s adjustments have lowered its first-quarter tariff impact of approximately $200 million by 35%, demonstrating its proactive response to these financial pressures.
Looking forward, Ford is modeling $1.5 billion net in 2025 from volume and price/sales mix forecasts. The company intends to counteract $1 billion of these expenses through remedial measures. House stated, “We are transforming this company into a higher growth, higher margin, more capital efficient, and more durable business.” This ambition is an encouraging sign of Ford’s resolve to turn around and improve its fortunes in a challenging environment.
This is a major shift of strategy for Ford as it ceases its exports to China. In tandem, the company is attempting to rebalance its imports from China. The decision further highlights the company’s goal of cutting unnecessary layers of operations and costs as global trade continues to be dynamic and unpredictable. Beyond just introducing the Megahall, Ford is making several other logistical changes, part of a larger plan.
Ford’s tariff impact appears to be less severe than other competition such as General Motors, which expects to pay $4 billion to $5 billion in tariff-related costs. Ford is still exposed to risk. This includes the risk of industry-wide supply chain disruptions that would have cascading effects on production.
Even with these signs working against the company, Ford’s management is as bullish as ever. With less vehicle imports than General Motors, the company is in a better relative position when it comes to tariff exposure. With the recent market tumult, it’s clear that markets require more vigilance and flexibility in Ford’s day-to-day operations.