Navigating Turbulent Times: Ford’s Financial Performance in 2024

Ford Motor Company faced a challenging business environment in 2024, navigating a range of economic and industry factors that impacted its financial results. Despite these headwinds, the automaker reported solid performance, with net income of $5.9 billion and adjusted EBIT of $10.2 billion for the full year.

Trade Policy Tensions One of the key issues affecting Ford was the ongoing trade policy landscape. Governments around the world have implemented or increased tariffs and other trade barriers, which can have a significant negative impact on manufacturers based in other markets. The new, substantial tariff increases on imports to the United States from Canada, Mexico, and China announced in early 2025, if implemented and sustained, would have a major adverse effect on the overall automotive industry, including Ford and its supply chain.

Supply Chain Disruptions While Ford saw improved supply chain resilience in 2024, production constraints due to capacity and labor shortages remained an issue as the company adjusted to shifting market conditions. The increased tariffs could further disrupt Ford’s supply chain and production. To address these challenges, Ford continues to reevaluate its supply base and sourcing decisions, which may result in additional charges in the future.

Currency Volatility Globally, central banks have begun shifting monetary policy, leading to unpredictable movements in exchange rates. Currency fluctuations can directly impact Ford’s financial flows and the pricing of vehicles exported to overseas markets. In some markets, exchange rates are heavily influenced or controlled by governments, adding to the uncertainty.

Pricing Pressure Despite elevated vehicle pricing over the past year, Ford has already observed some declines in new and used vehicle prices as auto production recovers from the semiconductor shortage. Intense competition and excess capacity are likely to put downward pressure on inflation-adjusted prices, including increased marketing incentives, contributing to a challenging pricing environment for the automotive industry.

Electric Vehicle Market Dynamics Ford continues to invest in its electric vehicle (EV) strategy, but has observed lower-than-anticipated industry-wide EV adoption rates and near-term pricing pressures. This has led the company to adjust its spending, production, and product launches to better match the pace of EV adoption. Ford may incur additional expenses and cash expenditures related to the cancellation of a previously announced all-electric three-row SUV program. Further, significant changes in the EV demand environment could lead to incremental competitive pricing actions and additional expenses related to payments to EV-related suppliers, asset write-downs, or other matters.

Commodity and Energy Prices Prices for commodities remain volatile, with the net impact on Ford and its suppliers being higher material costs overall. To help ensure supply of critical raw materials, such as those used in batteries for electric vehicles, Ford has entered into multi-year sourcing agreements and may enter into additional agreements. The global energy transition and geopolitical dynamics are also contributing to ongoing volatility in oil and other energy prices.

Vehicle Profitability Ford’s financial results depend on the profitability of the vehicles it sells, which can vary significantly by vehicle line. In general, larger vehicles tend to command higher prices and be more profitable than smaller vehicles. Government regulations aimed at reducing emissions and increasing fuel efficiency may also increase the cost of vehicles by more than the perceived benefit to consumers, potentially dampening margins.

Inflation and Interest Rates Ford continues to see lingering impacts on its business due to inflation, including ongoing geopolitical volatility, driving up energy prices, freight premiums, and other operating costs. Interest rates have increased significantly and are only now beginning to reverse, which may drive a higher cost of capital for the business. At Ford Credit, rising interest rates may impact its ability to source funding and offer financing at competitive rates, reducing its financing margin.

Segment Performance Ford’s performance in 2024 was mixed across its business segments:

Ford Blue: This segment, which includes the company’s traditional internal combustion engine vehicles, saw a 2% decrease in wholesales, primarily due to the end of production of the Fiesta in Europe and the Edge in North America. Full-year revenue was flat, but EBIT decreased by $2.2 billion to $5.3 billion, driven by unfavorable exchange, adverse mix, lower wholesales, and higher costs.

Ford Model e: This segment, focused on electric vehicles, saw a 9% decrease in wholesales due to lower Mustang Mach-E and F-150 Lightning sales amid competitive market conditions. Revenue decreased 35%, and the EBIT loss widened by $375 million to $5.1 billion, primarily due to lower net pricing from industry-wide competitive pressures, partially offset by lower costs.

Ford Pro: This commercial and fleet-focused segment performed well, with a 9% increase in wholesales, driven by higher sales of the Super Duty and Transit family of vehicles. Revenue increased 15%, and EBIT improved by $1.8 billion to $9.0 billion, reflecting favorable market factors, partially offset by higher material and warranty costs.

Ford Credit: Ford’s financing arm reported $1.7 billion in earnings before taxes, an increase of $323 million from the prior year. This was driven by higher financing margin and favorable volume and mix, partially offset by higher operating lease depreciation and retail credit losses.

Outlook for 2025 Looking ahead to 2025, Ford expects adjusted EBIT in the range of $7.0 billion to $8.5 billion and adjusted free cash flow of $3.5 billion to $4.5 billion. The company anticipates:

• Ford Pro EBIT of $7.5 billion to $8.0 billion, reflecting continued strength in its commercial and fleet products and services
• Ford Blue EBIT of $3.5 billion to $4.0 billion, with lower wholesales as inventories rebalance and exchange rate pressures, partially offset by cost efficiencies
• Ford Model e EBIT loss of $5.0 billion to $5.5 billion, as pricing pressure and ongoing investments in next-generation products are partially offset by cost efficiencies
• Ford Credit EBT of about $2.0 billion

The outlook assumes a U.S. industry sales range of 16.0 million to 16.5 million units and lower pricing across the industry as inventory levels normalize. Ford also expects to achieve at least $1.0 billion in net cost reductions.

However, the company is still assessing the full implications of the new tariffs on imports to the United States from Canada, Mexico, and China. If 25% tariffs are implemented and remain in place for an extended period, it would significantly reduce Ford’s earnings over the course of 2025.

Navigating Challenges, Investing for the Future Ford faced a range of headwinds in 2024, from trade policy tensions and supply chain disruptions to pricing pressures and electric vehicle market dynamics. Despite these challenges, the company reported solid financial performance, with strong results in its Ford Pro commercial and fleet segment offsetting weaker performance in Ford Blue and Ford Model e.

Looking ahead, Ford is focused on managing the near-term uncertainties while continuing to invest in its electrification strategy and other initiatives to position the company for long-term success. The company’s guidance for 2025 reflects its efforts to navigate the current environment while laying the groundwork for future growth.

Ultimately, Ford’s ability to adapt to the evolving industry landscape and execute its strategic plans will be crucial in determining its performance in the years to come. By staying agile, managing costs, and capitalizing on its strengths, the automaker aims to weather the current storms and emerge as a stronger, more competitive player in the global automotive market.