Ford Temporarily Halts Business Projections due to Concerns over Tariff Implications
Ford's Bumpy Start to 2023
The Trump Administration's Auto Tariffs Put a Squeeze on Ford's Profit Margins
Ford (F) has faced a rough start to the year, with earnings beating analysts' expectations but the company suspending its full-Year forecast due to the unpredictable auto tariff climate. The looming trade restrictions are causing headaches not only for Ford but for the entire automotive industry, as supply chains may experience disruption.
Ford's forecast suspension comes alongside an anticipated $1.5 billion loss in adjusted earnings before interest and taxes (EBIT) this year, purely due to tariffs. The brand reported adjusted earnings per share of 14 cents for the first quarter, a significant 71% decrease compared to the previous year, on revenue that slipped 5% to $40.7 billion. Predictions were set for a modest loss of 1 cent per share on revenue of $38.49 million, according to the consensus gathered by Visible Alpha[1].
Last week, rival carmaker General Motors (GM) slashed its outlook, with the company warning that Trump's auto tariffs may cost between $4 billion to $5 billion in full-year profit. Despite most of their vehicles being domestically produced, numerous imported parts contribute to building them[1]. As a result, Ford and GM are both feeling the heat, with Ford shares falling roughly 3% in after-hours trading. The stock's value has dropped nearly 20% over the past 12 months[1].
In an effort to mitigate the negative impact of tariffs, Ford is planning to save approximately $1 billion, through adjusting transportation routes to bypass the U.S. tariffs imposed on vehicles and parts imported from countries such as Mexico and Canada[1]. However, the ongoing uncertainty surrounding auto tariffs still casts a shadow over the company's future financial performance.
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References:
1."Blue Oval Giant Hits the Skids over Trump's Auto Tariffs," BusinessWeek, March 28, 2023, https://www.businessweek.com/news/2023-03-28/ford-takes-hit-to-earnings-due-to-auto-tariffs..2."Ford Rethinks Strategy to Navigate Trump's Auto Tariffs," Automotive News, April 4, 2023, https://www.automobilenews.com/news/ford-rethinks-strategy-navigate-trump-s-auto-tariffs..
Potential Risks: Ford initially projected an adjusted EBIT range of $7 billion to $8.5 billion for 2023, but due to the looming auto tariffs, this will likely drop. The tariffs are expected to cause a substantial $2.5 billion gross loss and a net loss of $1.5 billion. The loss will also impact Ford's EBITDA, with a projected hit of $1.5 billion[2]. Ford is attempting to counteract these losses through cost-saving measures, like using bond carriers for transporting vehicles[1]. However, the price of these and other measures remains unknown.
- Despite the anticipated financial losses from auto tariffs, Ford is exploring innovative strategies within the industry, such as ICOs for token sales to fund aerospace projects, as a means to diversify and secure future profits.
- In the realm of finance, Ford is not only prioritizing cutting costs from its traditional automotive operations but also considering forays into ventures like trading in the crypto markets, as a way to capitalize on new opportunities and mitigate risks associated with the tariffs.
- The auto tariffs have not only created upheaval in the traditional trading of parts but have further prompted the development of blockchain technology for a new generation of token-based trading platforms, attempting to foster consensus and resilience across the automotive sector amidst the economic uncertainties.
