Last night, Ford announced that it beat earnings expectations like a TEMU snare drum. Will the automaker be rewarded with a big increase in its stock price today? Almost certainly not. Ford, in particular, and the auto industry, as a whole, see 2025 as a difficult year with perhaps more chutes than ladders.
Speaking of games, I play Ultimate Frisbee poorly but enthusiastically. If you’ve never played Ultimate, it’s basically soccer if soccer was invented by golden retrievers. I bring this up in The Morning Dump because, as I’ve grown older, I’ve had to change a few things about my life to keep playing. When I was younger I could spend hours a week running around the field, jumping and colliding, and I wouldn’t get hurt. Other than a little yoga, I did no real cross-training.
Now I have to spend my off days stretching, lifting weights, icing ankles, and doing all sorts of exercise just to play the same amount of time I did before. The auto industry is, in this way, a lot like me. If it wants to keep existing it’s going to have to change.
Volvo is another automaker in the same boat. The company had a record year of sales in 2024 and, yet, the leadership is warning of a complex 2025. Audi? Yup. Audi continues to be a problem. Though maybe it can provide a solution for Porsche. Now that it’s official that Nissan isn’t going to team up with Honda, that brings Foxconn back in play.
2025 started weird, and it’s only going to get weirder.
For Ford, 2025 Is A Year Of Headwinds
In many ways, Ford had a strong 2024. Sales were up for the year, and the company had a big Q4. The Blue Oval was expected to report earnings per share of about 33 cents and, instead, Ford hit 39 cents. Ford’s commercial arm, Ford Pro, continues to be a strong profit center for the automaker.
So why did the earnings call not feel triumphant? Why is the market responding negatively this morning?
If you listen to enough earnings calls or read enough earnings transcripts, you start to understand what companies are saying, even if it’s a little indirect. In its call last night, Ford’s CFO said there would be “headwinds.”
Our full year outlook assumes headwinds related to market factors. We’re planning for lower industry pricing of roughly 2%, driven by higher incentive spending throughout the year.
For Ford, we expect this will be partially offset by top-line growth from upcoming launches. We expect these headwinds to be partially offset by about $1 billion of net cost reductions, primarily coming from lower warranty expense and material costs. Our team is aggressively working to deliver more than $1 billion, which would likely lift us to the higher end of our guidance range. And we expect the majority of these savings to occur in the second half of the year.
“Headwinds” is just businesspeople-speak for “different ways we expect to get hurt.” For Ford, there are three distinct headwinds, and these are mostly applicable across the industry:
- As alluded to above, consumers are basically tapped out with what they’re going to be able to spend on cars, meaning that the only way to maintain or grow sales is to cut costs. In this case, Ford sees incentive spending as the offset.
- The EV business is still a loser. Ford wants to keep losses stable, which means losing about $5-$5.5 billion. This is an “investment” if you’re moving towards a profitable model line, but pricing just isn’t there. There were too many new entrants at the same time and Tesla, with its huge advantage, sucker-punched everyone.
- This is slightly more specific to Ford, at least in scope, but warranty costs are a huge drag on Ford. The company is working hard, it says, to stem these issues and expects to save $1 billion next year from a decline in warranty work. That would be nice.
This is to say nothing of the potential disruption from tariffs, which is also on every automaker’s mind.
For all this, I’m actually a bit bullish on Ford. Losing money on every Mach-E and Lightning is going to suck, but Ford has the right idea going forward, which is basically: Cheaper, smaller battery EVs for some people. Multi-energy platforms (hello EREV) for other people, and ICE-powered trucks or HEVs for everyone else.
Here’s how CEO Jim Farley put it:
We’re deep in the development of our next generation of vehicles that we believe will be affordable, high volume and great for our business. On the U.S. retail side, the sweet spot that has emerged is small- and medium-sized trucks and utilities. These vehicles use case fits perfectly for EVs, daily commuters, well suited as a second vehicle in the household.
They require smaller, much lower cost batteries. These vehicles can be offered at lower prices to help adoption of EVs for the customers who really appreciate their lower operating costs. But for larger retail electric utilities, the economics are unresolvable. These customers have very demanding use cases for an electric vehicle.
They tow, they go off road, they take long road trips. These vehicles have worse aerodynamics and they’re very heavy, which means very large and expensive batteries. Retail customers have shown that they will not pay any premium for these large EVs, making them a really tough business case given the expense in the batteries. For Ford, our commercial customers do show potential for large EVs.
Ford has adopted the Skunkworks moniker for its smaller EVs, at least in the development phase, and this feels like the right strategy. In the Q&A portion of this call, Farley mentioned something else interesting:
Well, we’re really confident of our EV strategy because, believe it or not, most things that are happening are kind of playing to our strength. We believe that if the EPA or the California waiver is pulled, if there’s some change to the CO2 regime in the U.S. starting from ’27. By the way, the next two years, nothing happens, so it will be ’27 and beyond.
Ohhhhh boy. If California loses its waiver from the EPA to enforce its essential EV mandate, then does this also remove the need for automakers to pay Tesla the credits it relies on to remain profitable? Does Farley think this is going to happen? Would Elon Musk allow President Trump to do this?
While this wouldn’t necessarily impact Europe, where automakers also have to buy credits from Tesla, it’s an interesting thought.
Volvo Says 2025 Is Going To Be Tough For It, As Well
Profits were down for Volvo in Q4 despite the company having its biggest year of sales ever. Why? The company’s leadership keeps telling everyone it’s going to be a tough year.
“We’re going to see more turbulence,” Volvo CEO Jim Rowan told Reuters after the Swedish-based automaker posted a lower fourth-quarter profit. “We’re going to see more hyper competition, China will remain very, very competitive and we’ll start to see more competition in Europe.”
Majority-owned by China’ Geely, Volvo faces similar challenges to other major automakers, with a weakening market in Europe, new rivals in China where an electric vehicle price war has been raging for more than two years, and lower-than-expected demand for EVs in Europe and the United States.
European and U.S. tariffs on Chinese-made EVs are also a large worry for Volvo, which is moving more production out of China but faces tariffs in the meantime.
Volvo, being part of the larger Geely Universe, invested in both Polestar and Lynk & Co. as part of a plan to utilize the company’s Chinese production capacity to expand. That’s not quite worked out for the automaker and Volvo gave up its shares in Polestar last year. This year? Lynk & Co. is also getting the boot, with Volvo saying they’ll still work together:
Following today’s shareholder approval for the divestment of its entire shareholding in Lynk & Co, Volvo Cars underlines its commitment to its ongoing commercial partnership with Lynk & Co in Europe.
In September 2024, both companies formed a retail partnership, which Lynk & Co will leverage with a select number of Volvo Cars retailers in seven European markets through a wholesale model. This wholesale model allows customers to buy Lynk & Co cars directly from one of the chosen Volvo Cars retailers.
Chaos!
Is Porsche Going To Make A New ICE Macan?
Porsche’s big bet on the future was making its best-selling model, the crossover Macan, EV-only. Was that a good idea? Unclear.
There’s an article in Manager Magazine today that talks about how much trouble Audi CEO Gernot Döllner is having with the company, that includes a lot of bitchy details like this (translated):
In Ingolstadt, tempers flare when Döllner wants to reduce complexity but keeps making new demands about what the models should be able to do. Budgets are often not increased, and the projects are sometimes barely financially viable given the extra requests. Döllner, even those who actually support him, warn that he must accept other opinions sometimes. “He needs people who tell him the truth,” says one member of the supervisory board.
Audi needs a hard reset so I don’t have a strong sense of how much this is just internal resistance to necessary change. That’s interesting, but what I really want to talk about is the ICE Macan. We didn’t get an ICE Macan for this generation, largely because the model would have a hard time passing muster because of regulations. At the same time, its historic platform-mate the Q5 did get an ICE option.
You thinking what I’m thinking? From that article:
The combustion engine had to be redesigned. And the helper was quickly found: Audi. The Ingolstadt-based company has the Q5 on offer, and Porsche has been using the SUV’s platform since the Macan was launched in 2014 to keep its profitability high. Döllner’s predecessor Duesmann had not stopped the combustion version of the Q5: last summer, a renewed version of the successful model came onto the market.
The final decision on whether Porsche’s Macan will get a successor with a gasoline engine has not yet been made, say those involved in Stuttgart. But there is agreement: the model should be on sale in early 2028.
That sounds very possible.
Why I Think Foxconn Is Going To End Up With Nissan After All
Nissan today officially walked away from its potential partnership with Honda, surprising absolutely no one. The company just couldn’t square itself as a minority partner with Honda. This whole charade is hilarious to me, as the main reason why Nissan and Honda were even considering it is because the Japanese government (and probably some folks at Nissan) were loathe to become consumed by Taiwanese megacompany Foxconn.
What’s going to happen?
Nissan Motor’s decision to halt merger talks with Honda Motor could re-open the door to Taiwan’s Foxconn, the contract manufacturing giant with designs on moving into the electric vehicle business.
There are a couple of scenarios for how Foxconn might approach Nissan now that the Japanese automaker is possible to be a free agent again. It could wait for the slumping Nissan to determine that it could use a sponsor as it restructures its operations. If it hears any murmurs along these lines, it could propose its plan to make a strategic investment in Nissan.
Another option is to fast-track an acquisition, including via an unsolicited takeover bid.
Can Nissan, uh, Nissan this up? Absolutely. Foxconn, like Honda or any other rational partner, is likely going to want to see Nissan do a much more thorough restructuring prior to any kind of investment.
What I’m Listening To While Writing TMD
According to Apple Music, I was in the 95th percentile of listeners to British musician Self Esteem in 2024. Did I really listen to that much Self Esteem last year? I guess I did. Here’s “Focus is Power” off her upcoming album.
The Big Question
Bearish or bullish on Ford? How are we feeling?
Top photo: F Armstrong Photo/stock.adobe.com
You know that slow person on the Ultimate team that is always lined up against the opposing slow person? That’s me. While I loved playing Ultimate, I can’t run fast nor for very long. Being the slow hounddog matched up against the whippet was my frustrating fate. I ended up taking pictures more often than playing.
Self Esteem is AI generated Wilson Phillips. Prove me wrong.
As a Ford dealership employee, I naturally have a vested interest in them succeeding.
Whilst I think it’s cool they build quite a few niche vehicles, that means precisely fuck all in the grand scheme of things, as the vast majority of our customers come here to try to get an inexpensive lease on (mostly) Explorers and Bronco Sports.
Long story short, I’m somewhere in the middle on Ford, but I sincerely hope they pull their head out their arse in time. Everything is too damned expensive. $44K Escapes? With all due respect to Farley, I think management is creating some of those “headwinds” (I reaaaaaaaaaly hate that corporate bullshit speak) from within.
With regards to Nissan…(/Dolph Lundgren voice)…if it dies, it dies. I feel somewhat similarly towards Porsche, if I’m being honest.
I think Farley did well to see the need for the skunk works thing, and that is going to work out well for them. They aren’t going anywhere, but I think they will ride the wave with the rest of the industry until that platform is being sold.
Tesla’s clean slate approach did well for them too, but they lacked discipline in the early years, which they seem to have made up for. Meanwhile, Ford has that discipline, but lacked the clean slate. Which has me very interested in what fruit it bares.
I think this will become Farley’s best decision for the company in a generation. Keeping the ICE’s around for at least another 1 or 2 model generations makes sense as well, but stop innovating.
I feel that the ICE has probably hit an efficiency barrier by itself. The innovation will probably move to integrating the ICE and EV (hybrid) better. That, to me, is still early in development, and will improve a lot. But, the ICE alone, is basically becoming too complex to continue to improve the efficiency.
The EV Macan has been a huge mistake. They’re overweight and overpriced, and unlike other manufacturers Porsche will not incentivize anything it sells, mainly because it’s been a long time since they’ve had to. Porsche leases are infamously terrible, and Macan EVs are leasing at over $1,000 a month, which is absurd. People are only going to put up with the Porsche tax for so long.
You can lease the Audi Q6, its platform mate, for around $600 a month. BMW will let you lease pretty much any i4 (including the M50) for $600 a month or less. They’re giving Mercedes EVs away at this point. The average luxury buyer leases and the majority of EVs are leased as well (and for good reason), so I can’t imagine that the average luxury EV shopper is going to be okay with a 4 figure payment.
The average Porschephile who walks into a showroom and drops 6 figures isn’t interested in a commodity product or EV either. They’re trying to get the best 911 or Panamera they can afford. Porsche is either going to have to start heavily discounting the Macan EV or subsidizing leases or they’re just not going to move.
Honestly I kind of wonder if they’ve intentionally nerfed it so they have an excuse to make a new ICE one. Regardless, you can put money on there being a new ICE one in the next few years. They have the platform and the powertrains right there and the current iterations of the EA888/3 liter turbo 6 are good to go emissions wise since they’re releasing new Audis with them. I think the 2.9 liter 6 is as well since it’s still available in the new Panamera.
Porsche’s EV push has always felt a little weird to me. I think it’s probably because they’re so confident in their engineering ability that their attitude is sort of along the lines of “we’ll make our own version with blackjack and hookers”, and people that have driven the Taycan say it feels like a Porsche so maybe they’re right. But I just don’t think the type of folks that seek out Porsche specifically and are willing to pay the eye watering premium to do so are necessarily interested in being early EV adopters.
Regarding Ford… I’m neutral on them. They’re doing some things right, but they are still having issues with quality and they are still doing the odd stupid thing.
For example… anyone wonder why they haven’t made a new Lincoln Mark IX coupe based off the Mustang? Also anyone wonder why they haven’t made a Lincoln version of the Mach E?
It wouldn’t be that big of an investment for Ford to do both. So why don’t they? Are they allergic to profits?
Makes absolutely no sense to me.
And regarding Foxconn and Nissan… that’s a merger/acquisition that makes far more sense to me than the Honda-Nissan merger.
Considering there’s talk of a RWD Mustang sedan in the works, the possibility of Lincoln variations of both of them is intriguing to me, and I wish to subscribe to your newsletter
Back when I still had some agility and could run and jump like a golden retriever, ultimate became a thing and I was introduced to a league. Thing was, pretty much everyone in the league was a pothead, probably smoked cigarettes too and definitely subsisted on a diet of hot dogs. They were fun folks though, and I played weekly for most of a summer. I really enjoyed the game and felt competitive. A few years later I joined in a game with ‘healthier’ players. It’s an interesting feeling, going from one of the best players to dead last at something. Like getting used to beating a 4 year old and then having to compete with someone in your own cohort.
For this reason, I highly endorse your use of this as an opening dump today. Totally apt for much of the auto industry players.
Also, message to Foxconn: Look up the word hubris before you enter the crowded automotive business. You’d probably be better off starting your own airline.
Matt, I’m glad you brought up the regulatory credits! I’ve been meaning to say this “somewhere,” so why not here where we’re talking about Ford specifically:
Ford (and all the other carmakers) should stop buying regulatory credits from Tesla IMMEDIATELY. And don’t just stop quietly, either. Publish a public letter telling everyone that you are done with these transfer payments and are willing to go to court if required. The new administration is in the middle of gutting both the EPA and the justice department, and they’ve made a huge deal of supporting domestic manufacturers and opposing government EV mandates, so you should just take that to its logical
conclusion and publicly challenge them to come after you for this money.
Seriously. Why are you still writing these big checks?? Just stop.
Yes, they all should stop buying “regulatory credits” from Tesla, or anyone for that matter, immediately.
While I think this was supposed to be some sort of MDS/anti-Tesla rant, it unintentionally highlights the real issue: that “regulatory credits” are a thing, that they can be bought and sold, and that there exists a regulatory framework where this idea can even be conceived of. The entire concept is laced with corruption and graft from top to bottom, and deleting it from existence makes everyone’s lives better.
Only party I can see wanting Nissan would be one of the bigger Chinese companies to convert their lines to building export versions of their cars to ship to countries with trade restrictions against Chinese products using Nissan’s distribution network. Otherwise, everything they have is old and was of limited competitiveness when new, they have massive debt, their name has no snob appeal to resurrect, and the times when they were associated with good cars at a good price is long ago, now being associated with transmission problems, BHPH lots, and Altimas on 3 training wheels swerving through traffic at speed leaving the smell of skunk in their wake. Even their two name plates of value are of questionable use today unless they want to make GTR and Z CUVs and I’m not even sure that would work.
Nissan and Suzuki Merger perhaps?
Two sick people together do not make one healthy person…or some such ancient wisdom.
I mean, this is more of a transplant of organs from a braindead patient (Nissan) into a patient that needs new organs (Suzuki), not gonna be the healthiest person on the planet ever, but might be able to have several more good years than they would otherwise.
Suzuki is probably too small to be of much help but not sure Toyota would be terribly keen on that either given their ties with Suzuki. But then Toyota seems to have some kind of a tie to nearly every other smaller Japanese automaker too.