Pony Power: The Iconic History of the Ford Mustang
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- Ford CFO Sherry House discussed the impact of tariffs and supply chain disruptions on the company’s production and costs.
- House said Ford is working to mitigate the potential production disruption caused by rare earth mineral export restrictions from China.
- Ford is working with suppliers to reduce tariff exposure by investigating options for moving production to the US.
In a extensive reach interview with Wall Street analysts on June 4, Ford Motor Co. outlined how tariffs and supply chain disruptions affect Ford’s vehicle production and its costs.
Ford CFO Shelly House said the Dearborn, Michigan-based automaker will provide details on the economic impact of President Donald Trump’s tariffs and other policy changes on revenues for the second quarter next month. But she warned that many unknowns are still categorized, all of which could make Ford’s future finances “a bit lumpy.”
“If you move into the next few weeks and prepare for a quarter, you’ll end up with some guidance and you’ll end up with a warning that you can’t define,” House said. “Order we encourage other analysts and investors to understand the business as much as possible with all the information we think we can help you.”
Here are the top takeouts from House’s Fireside chat with analyst Joe Spak at the UBS Auto and Auto Tech Conference in New York on June 4th:
About obtaining parts from the country
According to House, Ford has seen a backlog for putting rare earth minerals into the supply chain, so Spak asked how it would affect vehicle production.
“There are many components where rare earth minerals exist, and many of the ones that come from China have an additional layer of administrative processes as you need to go through export controls now,” House said.
She said sometimes the components go through smoothly and at other times there is a hold-up, which Ford must take action to mitigate the confusion.
“We need to look for alternative parts and alternative ways to get things,” House said. “Frequently, it may go through and take more time. So you may be facing a quick shipping cost that you didn’t expect, and it just puts stress on a very organized system with parts ordered weeks ago.”
She said Ford has managed the issue so far, but warned, “Don’t you know if this will become a bigger problem for us?”
Trump’s latest tariffs: Regarding the boost to 50% steel and aluminum, House said the impact on Ford should be minimal as Ford will buy all aluminum from domestic suppliers and 80% of steel from US sources. Ford manages steel price increases through “contract pricing.” That is, the price is already set.
“So when all this hits, the impact is slow,” she said.
Regarding refunds for certain customs duties
On April 29, Trump signed an executive order setting up a complex system of federal reimbursements for specific imports of auto parts and components for the next two years used in vehicles made in the US. The order gives Detroit carmaker some relief from what Trump previously ordered. A 25% tariff on all imported vehicles that began in April, and an additional 25% of imported automobile parts scheduled to begin by May 3rd.
Spak asked how to ask Ford for a federal refund for parts compliant with the US-Mexico-Canada Agreement, as outlined in the order Trump signed at the end of April. She said many of them are still defined.
“I don’t know completely,” House said. “So you’re paying tariffs now. I think there’s a very good chance there’s a delay in getting those offsets. I’m talking about offsets on parts. It could be a quarter, and that could be on some quarter.
About moving suppliers here outside the US
The good news for Ford is that 80% of the parts used in that vehicle are USMCA compliant, and 80% of vehicles sold in the US are built here. Still, in its first quarter revenue report, the automaker warned that tariffs would add a net expense of $1.5 billion this year.
Regarding 20% of suppliers who imported parts, House said Ford was in conversation with them and wanted ways to reduce Ford’s tariff exposure and reduce those costs, meeting the supplier’s business obligations.
“When we face the tariff situation, we face it,” House said of Ford’s suppliers. “Does the type of conversation we have have additional capabilities in the US? Can we move to the US? What kind of investment will help us get there?”
However, she described which suppliers seeking changes as a “very complicated and nuanced situation” with a supply base. Ford is considering the types of quality, costs, technology and performance that suppliers have provided in the past, how they will work with them around tariffs, she said.
“But on an individual basis we decided whether it would make sense to make some of these changes,” House said. “There’s nothing to be announced with you right now, but of course you’ll first be some of your higher priced components, items that will affect more vehicles, that’s the order of operation.”
About finding partners in EV and battery production
House did not address a May 25 report in the Wall Street Journal that said Ford would say it would share production space at its Kentucky battery plant with rival Nissan. The move shows a cut from Ford’s electric vehicle investment, helping Japanese automakers reduce exposure to tariffs on imported vehicles and parts.
However, given the “very competitive global environment” with companies with a variety of needs and technology levels, it makes sense that House is thinking about partnerships to get more efficient, especially when it’s a field where Ford doesn’t need to be number one.
Changes in Ford workplace
House joined Ford about a year ago and has become CFO in recent months. When asked how she saw the company change culturally, she listed several ways:
First, Ford began putting more experts in the role rather than putting truly great generalists in the role. For example, when we made Lizdoor the best supply chain officer in 2023. House called her “an incredible supply chain leader at the forefront of that thinking.”
House said Ford challenged him to think, “Don’t let your governance define how the pace of business will be.”
“What happens when big businesses happen is that they have weekly meetings on topics, monthly meetings on topics, quarterly meetings on topics. What happens when you set up your business like that. “But if you retreat and allow priorities to define governance and governance structures, your business can define the pace. I think you can go faster and make sure you focus on the right things.”
She said Ford is considering “breaking boundary constraints” at the Strategic Meeting.
“If you’re having a meeting on one feature, you often can’t break boundary constraints because there are not all people who say you can say you can do something. “So there are more functional meetings too. All of these are tactics that can make a difference.”
Jamie L. Larrow is a senior Autos writer covering Ford Motor Company for the Detroit Free Press. Please contact Jamie at jlareau@freepress.com. Follow her on Twitter @Jarouan. Sign up for our car newsletter. Become a subscriber.
