Ford swings to loss as costs from recalls and Trump tariffs pile up

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Ford reported a surprise quarterly loss stemming from the cost of recalling nearly 700,000 vehicles and an $800mn headwind from Donald Trump’s tariffs.

The Detroit carmaker became the latest company swept up in the US president’s tariff trade war turmoil, disclosing that it had secured a $3bn credit line as well as a £1bn UK export financing to prepare for rising cost and cash pressures.

For the April-to-June quarter, Ford booked a net loss of $36mn, compared with a profit of $1.8bn a year earlier and far below the consensus analyst estimate of $1bn in net income, according to data from Visible Alpha. Revenue was up 5 per cent to $50.2bn as sales of pick-up trucks and hybrids increased in the US.

The company said it now expected a $3bn hit from tariff-related costs for the full year, of which it plans to offset by cutting $1bn in costs such as shipping. In May, it had warned of a $2.5bn hit to this year’s operating profits due to the tariffs.

Ford is better positioned on international supply chains than General Motors — which booked a $1.1bn hit from tariffs during the second quarter — as it manufactures a greater percentage of vehicles in the US.

But it remains exposed since it imports car parts from Mexico and Canada that have been slapped with a 25 per cent levy. It is also wrestling with increasing raw material costs as suppliers pass on the costs of higher aluminium and steel tariffs.

American carmakers have lobbied hard for the Trump administration to soften trade terms with Mexico and Canada, especially after the US sealed agreements with Japan and the EU that have brought down import tariffs to 15 per cent.

Chief financial officer Sherry House said the Trump administration had made it clear “that Ford as the most American automaker should not be disadvantaged in the long run”.

“We are optimistic that we’ll be able to get some improvements here that will accrete to our bottom line,” she added.

Ford, which pulled its annual guidance in May due to tariff uncertainty, said it now expected an adjusted operating profit of $6.5bn-$7.5bn for the full year. That came in lower than the initial range of $7bn-$8.5bn it gave before Trump imposed 25 per cent tariffs on imports of foreign-made cars.

Shares in Ford fell 1.6 per cent in after-market trading on Wednesday.

In addition to the hit from tariffs, Ford has also struggled with a series of quality issues as well as the cost related to a cancellation of a dedicated electric vehicle platform.

In a filing earlier this month, the company said it would book a $570mn charge during the second quarter after it recalled nearly 700,000 of Bronco Sport, Escape and Kugamodels over fire risk caused by cracked fuel injectors.

House said the company was making efforts to improve the quality of its vehicles: “We’re making progress and expect warranty cost to decline in the years ahead.

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