By on September 26, 2018

Ford’s decision to construct the current-generation F-150’s body purely of aluminum paid off in terms of lightweighting, fuel economy, and sales, but rising commodity costs over the past couple of years eroded some of the financial benefit. There’s far greater headaches facing Ford these days, as the industry grapples with tariffs on not just imported aluminum and steel, but vehicles as well.

A second income-sucking tariff hit in July, when the U.S. applied an import duty of 25 percent on a slew of Chinese goods, prompting China to up its own tariffs on American goods, including automobiles. Ford isn’t having it. Having already lost $1 billion in profit, CEO Jim Hackett has a message for President Trump.

If the U.S. doesn’t resolve its trade disputes in a hurry, expect Ford to suffer even more, Hackett claimed.

In an interview with Bloomberg, the CEO said, “The metals tariffs took about $1 billion in profit from us — and the irony is we source most of that in the U.S. today anyways.” He added, “If it goes on longer, there will be more damage.”

Ford sources 95 percent of its steel from U.S. producers and suppliers, with 98 percent of the company’s aluminum bought from domestic sources.

As we reported earlier this week, Ford Motor Company sales in China dropped 36 percent in August. The same month, tariffs kiboshed Ford’s plan to bring the China-built Ford Focus Active to the U.S., depriving American buyers of the only small, car-like vehicle in the automaker’s future product pipeline.

Meanwhile, the company’s struggling European division stands to lose out, and perhaps never get back on its feet, if Trump boosts tariffs on European Union-built vehicles. The president threatened punitive tariffs on Europe-sourced vehicles in response to an existing 10-percent tariff levied on U.S. cars. While the EU signalled it might be okay with the dropping of all auto tariffs, that olive branch went nowhere.

“What we’re urging our administration to do — where we’re in China and in Europe — we say, you need to come to agreement quickly,” Hackett told Bloomberg.

Besides negatively impacting Ford’s profit (analysts predict a 29 percent slump for 2018), the trade dispute certainly hasn’t given investors newfound confidence in the company. Hackett’s taken a lot of heat for the company’s stubbornly depressed stock price, and Moody’s decision last month to downgrade it to near junk status didn’t help one bit. August was a bad month for Ford, and the hurt might be far from over.

[Image: Ford Motor Company]

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79 Comments on “As Ford Takes a Hit, Hackett Appeals to Trump to End Trade Disputes...”


  • avatar
    Sub-600

    It’s not Trump’s fault that Ford put all their eggs in one basket. Not 24 hours ago, DW predicted that this would happen.

    • 0 avatar
      28-Cars-Later

      Read my mind.

    • 0 avatar
      MrIcky

      Meanwhile, workers in the rustbelt are doing Tiger Woods style fist pumps.

    • 0 avatar
      DeadWeight

      Thanks Sub!

      I’d rather be lucky than good, but I think that I’m good.

      “DeadWeight
      September 25th, 2018 at 12:48 pm

      IOW, Ford has not been this exposed to an overall economic downturn, and more specifically, a downturn in light pickup truck sales, since the period of 2004-2007.

      Ford is the closest thing to a one trick pony in all of the automotive world (volume manufacturers), has most of its eggs (and nearly all its profitable ones) in one nest, and has its A$$ completely exposed to any and all risks on the horizon.
      Login to reply

      sportyaccordy
      September 25th, 2018 at 1:06 pm

      So, TTAC Oracle, what’s your fix?

      DeadWeight
      September 25th, 2018 at 7:44 pm

      The “fix” is for Ford to do some diversification (the exact opposite of what Jim HACKett and his lackeys are doing now) so that they aren’t reliant to an asinine % that is equal to or possibly greater than 84% on the F Series.

      Ford has exposed themselves like this twice before (late 1992-1996) and 2003-2006) and they barely survived to fight another day.

      Ford’s entire business model IS THE F SERIES.”

      • 0 avatar
        FreedMike

        Yep.

        We’ve talked a lot here about what would kill truck and SUV sales, and I’m not sold on gas prices being the main culprit, but higher borrowing costs will hurt.

        And because of the current economic policies – the tariffs being one of them – that’s exactly what’s happening.

        I’d say FCA is the next most vulnerable automaker.

      • 0 avatar
        Scoutdude

        Except Ford’s entire business model is not the F-Series, they do have over 50% of the commercial van market and their C/S UVs do quite well on average with the Explorer being #1 in its class and don’t forget the Mustang is #1 in its class too.

        • 0 avatar
          DeadWeight

          “To try to put into context just how many F-Series Ford sells in comparison to the remainder of its portfolio, consider that Ford sold more F-Series trucks through the first half of 2018 than its entire SUV portfolio combined. The F-Series alone outsold Ford’s entire car segment by nearly 200,000 units through June. More than one out of every three Ford-branded vehicle sold through June was an F-Series truck.”

          “The F-Series hauls in the big bucks on the bottom line. In fact, Morgan Stanley analyst Adam Jonas wrote in a March 14, 2018, note to investors: “[w]e calculate the value of the F-150 franchise may be worth more than 150% of the company’s enterprise value.” Jonas goes on to suggest that even a 5% change in F-150 production could be worth nearly 10% to Ford’s earnings. Later in the Morgan Stanley research report, the team calculated that Ford’s pickup trucks could generate 105% of its current total operating profit — much higher than General Motors’ 64.7%, which is a great thing when the F-Series has phenomenal years such as 2018, but also a little concerning since it means the company’s automotive profit — remember that Ford makes a lot of money with Ford Credit, which isn’t included in automotive operations — is highly dependent on one product line.”

          http://www.fool.com/investing/2018/07/22/just-how-important-is-the-f-series-to-ford-motor-c.aspx

          • 0 avatar
            DeadWeight

            REPEAT FOR EMPHASIS

            “Later in the Morgan Stanley research report, the team calculated that Ford’s pickup trucks could generate 105% of its current total operating profit.”

        • 0 avatar
          EBFlex

          Explorer #1?

          Must be a pretty low bar, the Explorer is a joke.

          And Ford doesn’t care one lick about the Mustang. They would rather it gone.

    • 0 avatar
      SSJeep

      Yeah, its hard for me to feel sympathy for Hackett when at the helm of Ford, he has been responsible for ceasing all sedan manufacturing other than the Mustang AND making the decision to develop and import the terrible EcoSport from India. Ford did this to themselves.

  • avatar
    JimC2

    Hey, are there, like, elections coming up soon??

  • avatar
    kenwood

    Amidst these international trade negotiations, US automotive consumer Kenwood has a message for CEO Jim Hackett: “Suck it up princess or go buy some domestic aluminum.” Kenwood was also overheard saying “Can somebody get little Jimmy a tissue?” CEO Jim Hackett has yet to comment any further.

    • 0 avatar
      Astigmatism

      US automotive consumer Kenwood apparently does not realize that domestic aluminum is also more expensive, but despite not understanding basic market principles feels perfectly content to lecture the CEOs of major corporations on how to run their businesses.

    • 0 avatar
      Fordson

      “Ford sources 95 percent of its steel from U.S. producers and suppliers, with 98 percent of the company’s aluminum bought from domestic sources.”

      Wow – too bad they buried this in, like, the 5th paragraph, or I’m sure you in-depth readers would have caught it.

      • 0 avatar
        Gardiner Westbound

        What goes around comes around.

        “Nearly 15,000 workers are negotiating new labour deals at steelmakers ArcelorMittal and U.S. Steel — which together account for a quarter of all U.S. steel production. They voted last week to give their union, the United Steelworkers of America, the right to call a strike with two days notice. As steel prices soar under the tariffs, union leaders say workers deserve a bigger share of the profits.” – Financial Post 9-26-2018

        • 0 avatar
          28-Cars-Later

          Soaring steel = more steel jobs = more expensive Brodozers.

          Vicious cycle.

        • 0 avatar
          slavuta

          @Gardiner Westbound

          Exactly. Same as wheat. With whatever sanctions they made up against Russia, Ruble fall made Russian farmers make it big. And when they sell wheat cheaper than US farmers can, our wheat farms closing down faster than I can type this.

          This is my favorite slogan – what goes around comes around.

          So, here, besides everything else, there were some sanctions against russian aluminum corporation. That can’t help aluminum consumers.

          In any case. Remember when Trump was only a candidate? When he was picking on Ford. Trump can see farther than most. He knew Ford is in trouble. Now he can tell Hackett – I told you so!

        • 0 avatar
          notwhoithink

          “As steel prices soar under the tariffs, union leaders say workers deserve a bigger share of the profits.”

          And when the tariffs (which in even in Trumpie’s minds should be understood as temporary) go away, these steel makers will become even more uncompetitive than they were before. Sounds like a winning strategy for the American worker.

      • 0 avatar
        JimZ

        SNAP

      • 0 avatar
        SPPPP

        As Fordson pointed out, Hackett is not complaining about the price of the metals. He is complaining that Ford sales have tanked in China as a result of the new Chinese tariffs, and the soft boycott that is now taking place. That is where the $1 billion of lost profits are coming from. The fact is that US automakers are now counting on profits from China in a way that they didn’t even 5 years ago. This makes them actually very vulnerable to being caught in the crossfire of a “trade war”. Which is probably true of any business with a global supply chain, but automakers are among the most visible.

    • 0 avatar
      notwhoithink

      So according to the article they’re getting 95% of their steel from US suppliers and 98% of their aluminum from US suppliers. Or didn’t you bother to read it?

  • avatar
    Hummer

    That’s about funny, Ford wants to beat there record sales mark from 2004 when it’s trucks were made of plain old steel and profit margin was arguably lower than today. And now Fords pissed because their cash crop makes slightly less per sale, not due to any trade war but because they decided to go all in on Aluminum. I would say Ford shot itself in the foot but instead Fords seems pissed because it only makes $20k profit margin on its trucks rather than $22k. Whatever. Hard to find sympathy here.

  • avatar
    Superdessucke

    Maybe if they weren’t so truck heavy, pun intended, they wouldn’t need to rely on aluminum so much? F them. Keep making America great Trump!

    • 0 avatar
      JimC2

      Did you just try to lighten the mood with some wordplay?

      Maybe a way around the raw material tariffs would be to find an “aluminium” supplier… or am I being elemental?

      • 0 avatar
        Superdessucke

        Yes I did try, and I hope I made somebody’s day! Yeah it sounds to me like maybe they should be looking for a new supplier.

        I mean Ford’s business strategy is their business but don’t come crying to the government and try to get them to alter their policies that are trying to improve things for average Americans just because of your short-sighted business ideas.

        Unfortunately, I have a feeling they are going to be back for more soon enough when gas prices rise and nobody wants trucks, CUVs and SUVs all of a sudden.

  • avatar
    06M3S54B32

    Agent Orange is the idiot that keeps on giving.

    • 0 avatar
      civicjohn

      @06M3S54B32, last I checked, the Orange one was not on the design team who pushed for the aluminum F.

      Hackett’s just pulling notes together for the next board meeting, where lunch will be served with his head on a platter.

      • 0 avatar
        Fordson

        And of course it should have been obvious, back in 2013 when they were making these decisions, that aluminum would be more expensive because we have an idiot in the White House.

        Tool.

        • 0 avatar
          Hummer

          In case you didn’t notice that idiot left the White House in early 2017, I know we’re still reeling from his policies but that worst is over.

          Orange man not as bad as you purport.

          • 0 avatar
            civicjohn

            +1 Hummer

          • 0 avatar
            CaddyDaddy

            +1 Hummer. As far as commodity prices rising, I usually just see press releases disgusted as news written or copied by reporters knowing where their bread is buttered, their advertisers. It’s an excuse to raise prices.

            Fact: Price of ferrous and non-ferrous scrap (aluminum) (that is all non-iron for you Rio Linda types) is down, way down. Thus, internal USA demand is not at a premium.

            I read a news article that according to the Craft Brewer’s Association in Colorado, craft beer was going to jump 10% in price because raw aluminum is going up 10%. That assumes that aluminum is 100% of the cost of craft beer. A fallacy the reporter was too brain dead to catch or supposed that the reader would not understand basic math.

            We have a large enough market to support competition without outside input of commodities. We did it for decades and had a stronger country with a healthy middle class. MAGA!

            Sorry for those of you with healthy ports and import processing centers (LA and Oakland). Its time for the heartland to take bake what you stole.

        • 0 avatar
          Art Vandelay

          Of course it should have been…We have had an idiot in the White House pretty much since Ike left office.

          • 0 avatar
            slavuta

            Ronnie was good dude. At least with the background of Hollywood actor he was not buying the socialism.

          • 0 avatar
            iNeon

            Slav– Brush up on your history, buddy. You’re very wrong.

            The man watched gay men die by the thousands and never mentioned the cause until his second term. Doesn’t take much logic to understand why.

            Took ‘Ronnie’ another 5 years to apologize for allowing the epidemic to take root.

            He wasn’t a ‘good dude.’ Not by a long shot.

          • 0 avatar
            28-Cars-Later

            What could CDC have done? Quarantine anyone they suspected of being infected? Horse left the barn long before and there was no getting it back in.

          • 0 avatar
            slavuta

            @iNeon

            then FDR is total nazi. He turned away ships of Jews and they got burned in the ovens.

        • 0 avatar

          They could not predict Trump being president in 2013. No one could. It was unthinkable even two years ago. Until 9pm election night I did not take him seriously either. I felt depressed that only option we had was hilarious. And then – oh joy! Our man in White House! Putin did it!

          • 0 avatar
            slavuta

            @inside out

            I knew Trump will win fairly easy. I have this ability to feel things on the deep level. I saw hillary signs and no trump. But something told me that this is not a number of hillary signs that will win the election. And absence of trump signs told me that it is a shocker coming from nowhere.

          • 0 avatar

            @slavuta I had a liberal friend at work who lived in SF and had strong feelings of nostalgia about “social justice” and socialized medicine (in USSR) and who was avid supporter of all things Obama and referred to Republicans as “thugs” (“Republican thugs”, no less no more, I felt amused). He constantly displayed dissatisfaction with the candidacy of H and closer to elections he became convinced that she will loose. I tried to comfort him and cheer him up showing him polling data. But man was he smart? I did not see it coming. New era of nationalism is here, everywhere – in US, Britain, France, Japan, China, Russia, even Germany. UNGA may laugh as much as they like but trouble is coming and nothing can stop it.

  • avatar
    redapple

    tariffs are a short term ploy used to make other countries play fair.
    short term pain.
    long term fairness.

    He did offer zero tariffs in both directions.

    • 0 avatar
      FreedMike

      Problem is, he didn’t talk much about the short term pain. It was all going to be great, fabulous, awesome. Unicorns farting rainbows, all that. Turns out he is not all that different from most other politicians.

      I don’t have as much of problem with what Trump’s trying to accomplish as I do with how he’s trying to accomplish it.

      • 0 avatar
        TwoBelugas

        “I don’t have as much of problem with what Trump’s trying to accomplish as I do with how he’s trying to accomplish it.”

        In reality he is the first one that actually did something about it. Over the years as the trade deficits grew larger and American companies keep handling over intellectual properties over to Beijing just to be able to get a local partner, and see knockoffs pop up overnight with impunity, what has previous administrations (both D and R) done about it?

        • 0 avatar
          gtem

          Yeah, how else was he supposed to do it? The “polite” Ds and Rs have done nothing but willfully let this country’s industry and manufacturing sector (and along with it, the middle class) get taken to the cleaners for decades.

        • 0 avatar
          DeadWeight

          The U.S. trade deficit has NEVER been larger in all history than it has been under Trump’s first nearly two years (make of that what you will), hitting a new record as of August.

          https://www.cnbc.com/2018/09/05/us-trade-deficit-jumps-by-the-most-in-3-years.html

          Everything I’ve stated as opinion about Ford being incredibly exposed and vulnerable due to lack of product and profit diversification stands.

        • 0 avatar
          Big Al from Oz

          2belugas,
          Um…..your trade deficit is still rising ……..

          Just saying?

      • 0 avatar
        slavuta

        @FreedMike

        this is like life is awesome while credit is there. Once you took all the credit out, you got to cut the appetite.

        But here is what happens – building stuff in China is good because they don’t spend on pensions, work conditions, environmental policies, healthcare. Workers commit suicides etc. And in America this is not gonna cut. So, our product is more expensive but our worker is better taken care of and companies can’t use dangerous materials for certain processes, etc. So, when China will start doing that part, their manufacturing will be more costly. And it is right to put tariffs on this dumping practices. This is like building muscles – no pain no gain

    • 0 avatar
      Big Al from Oz

      Like the EU zero tariffs.

      Trump is not honourable. Can’t be trusted.

  • avatar
    FreedMike

    Trade warz is kewl and eazy to win.

  • avatar
    dukeisduke

    “Lightweighting”? Is that like “impactful”? I hate that word.

  • avatar
    vehic1

    Astigmatism: +1

  • avatar
    vehic1

    Trade wars “easy to win”, “short-term pain”, “I’ve got a great deal on a used casino!”

  • avatar
    jimmyy

    Ford has problems. It’s business model requires low cost outsourced supply chains. Bad move Ford.

  • avatar
    St.George

    If Ford sources virtually all its steel & aluminum from the US, why is it saying that tariffs on those materials (that apply to imported metals) are costing it more?

    A quick look at aluminum commodities pricing:-

    http://www.infomine.com/investment/metal-prices/aluminum/all/

    Aluminum is currently $0.92/lb, exactly where it was 5 years ago (all time high was about $1.40/lb in 2008 before plunging to $0.6/lb in Jan 2009).

    Steel has been rising but this is due to supply & demand. When the economy does well, the demand rises, as does the price. Historically China has been the largest consumer of steel due to the crazy construction boom, this has affected world steel prices both upwards & downwards.

    How much of a vehicles weight is steel anyway? 1 ton? At the moment, steel is approx. $675/MT. If it goes up 50%, that adds $340 or so to the price of a car. I for one would pay a few hundred bucks more for a vehicle made with US sourced metals.

    • 0 avatar
      JimZ

      “If Ford sources virtually all its steel & aluminum from the US, why is it saying that tariffs on those materials (that apply to imported metals) are costing it more?”

      er, because the domestic suppliers can raise their prices?

    • 0 avatar
      DeadWeight

      Again, all commodities, including aluminum, are FUNGIBLE.

      Everyone speaking to domestic versus foreign-produced aluminum pricing should take a crash course in what fungibility means and how it relates to economics and business.

    • 0 avatar
      SPPPP

      It’s not the metal prices that are causing the majority of the damage, it’s the effect on Ford’s sales in China. Hundreds of thousands of lost vehicle sales and forced discounts that have resulted from the Chinese tariff and “boycott-lite” counter-attack. All of which was highly predictable.

    • 0 avatar
      notwhoithink

      US producers have been able to raise their prices. Also, since China has retaliated for US tariffs by levying it’s own tariffs, it’s getting harder to sell US-made products there (like Ford vehicles). Even without the counter-tariffs there’s still a negative association with US brands in response to the tariffs.

  • avatar
    EBFlex

    Furniture guy whining like a petulant child.

    Suck it up buttercup. This is what happens when your engineers are dumb enough not to know how to make a component lighter yet still capable. They are lazy and just said “lets change the body then we won’t have to do actual work”. And Big Al said “durp ok then”.

  • avatar
    Big Al from Oz

    I have preached for years regarding the perils of the US tariff (25% Chicken Tax), regulatory and trade barrier structure and the impact it will have on the US auto industry.

    The 25% chicken tax, plus the other non tariff barrier were bad enough, now the increase in metal prices is creating a less competitive industry. It will fold.

    The problem for the US now is the cost of goods and services will rise, reducing demand. While the cost outside the US is constant.

    With countries applying import tariffs on US goods, topped with increase costs to US producers will make US exports less attractive.

    Well, I told you so.

    • 0 avatar
      DenverMike

      @BAFO – The US has no “non-tariff” barriers, or can you name a specific one, and name one specific global car or truck it impacts enough to block its import to the US.

      If you mean “US Lemon Laws” then I’m listening, but they’re for protecting US consumers, and something you’re obviously not used to in the Africa/Australia/S.E. Asia markets.

      If you want to call cheap fuel and “non-tariff” barrier by default, impacting diesel and or 1 liter, 1.2 etc, engines again I’m listening.

      Tight US emissions laws, CARB, etc? They’re tough on every brand, but alright.

      Tough crash protection? Same as above.

      But the Chicken tax serves the offshore brands way more than Ford or the other Big 3 “domestics”. Not that is serves the offshore brands much to speak of, but the Chicken tax only hangs around to counter the European Chicken tax. Neither are getting dropped without a US/EU pact, accord or free trade.

  • avatar
    Art Vandelay

    Eh, I can still afford it. That is America today, right? I Got mine…that’s the saying, right? You call people dumb for their beliefs long enough they become cynical and quit giving a crap about the “smarter” people that in spite of all those smarts can’t seem to make as much as you do. Screw em, enjoy your crapboxes.

  • avatar
    Lockstops

    That’s the difference between Ford and smart companies like VW, Tesla etc.: smart companies try to understand, predict (and even use corruption to find out what regulators etc. are going to do next or straight up pay them to put in regulations that they want) so that they can best gear their operations to suit the upcoming conditions. They look to win by doing what’s optimum in the real world at every moment. Ford just complains when things don’t go well as they just keep churning out their ancient and inwards-looking strategy year in, year out.

    Maybe Ford should start operating in the real world instead of expecting the whole world to be in line with everything that they decided to do years ago, and keep getting disappointed and lose over, and over, and over again.

    (I’m not saying VW and Tesla are good companies, just that they are smart in how they deal with the outside world at least with regards to regulations, politics etc.)

  • avatar
    Timmy Kiner

    encourage someone to start producing steel again in the United States and you won’t have to go to other countries to get steel. it’s as simple as that and you can’t tell me that we can’t produce Steel.

  • avatar
    DenverMike

    Ford played the best hand god dealt them, went all in, lost a billion, should’ve known better, listened to BAFO, end of story, right?

    Oops yeah, you can’t plan for everything, but a billion cuts how deep into multi-billion F-series net profits? More than 800,000 units times, on average at least $10,000 each?

    Of course there’s the “All Eggs, One Basket” thing, but right here, right now, who else can do that?

    If Ford can sustain that, keep it going, plus every model, car to truck, contributing dramatically or gets cut? First they should buyout Toyota, just to build the Tundra in Mexico, bring the Tacoma to Texas where it belongs, Camry production back to Japan, kill the 86, and the Celica RWD V6/V8, Mustang fighter for frick’s sake.

    No one knows what tomorrow will bring, but if the experts are right, it won’t matter what you’re selling in the next economic hiccup, so be extra kind to animals just in case.

  • avatar
    tylanner

    Ummm vote democrat?

    You elect an idiot you get idiotic policies…

  • avatar
    xsnake ralf

    Since WW2 America’s been taking it in the shorts trade-wise, with most of the world. Europe and the UK were in deep economic trouble after the war….so was Japan.
    The government gave them all “a hand up” with trade agreements that were very beneficial to them….not so much for us.
    China fell into the, “emerging” nation category….they also got trade agreements that were more beneficial to them, than us.
    Time to “level the playing field.” Gonna hurt some companies….many customers….but in the long run….fairness will win out.
    Ford….don’t contribute to global whining.


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