Ford CEO Jim Farley Warns of Tariffs Impact on Auto Industry
Ford Motor Company (F) CEO Jim Farley has expressed concerns over the potential effects of tariffs on the automotive industry. In a recent earnings call, Farley emphasized the significant impact 25% tariffs on Canada and Mexico could have on industry profits and American jobs. He estimated that such tariffs could lead to billions of dollars in lost profits and adversely affect the entire value chain in the auto sector.
Farley's remarks come amidst President Trump's recent imposition of a 10% tariff on China and a 30-day pause on tariffs against Canada and Mexico. Experts believe these tariffs could disrupt auto supply chains, as the industry relies heavily on imports from both Mexico (26%) and Canada (12%). The Ford CEO acknowledged that short-term tariffs may be manageable, but prolonged measures could be detrimental to the company's financial performance.
Industry Response and Market Reaction
Farley's concerns align with those expressed by General Motors (GM) Chair and CEO Mary Barra. GM's recent earnings outlook did not factor in the impact of tariffs, raising concerns among investors. The financial implications of tariffs are also reflected in Ford's share price decline of almost 4% in early trading on Thursday.
Automakers face a dilemma in balancing the potential price increases resulting from tariffs with falling demand. Kelley Blue Book estimates that 25% tariffs on Mexico and Canada could increase the average cost of a car by $3,000, potentially driving consumers towards cheaper used vehicles.
Ford's 2025 Outlook
In its earnings report, Ford adopted a cautious approach to 2025. The company projected adjusted operating profits between $7 billion and $8.5 billion, lower than the $10.2 billion reported in 2024. RBC analyst Tom Naryan lowered his price target on Ford shares, citing concerns over inventory days, net pricing, launch costs, and EV volumes impacting profitability.