WSJ What’s News
What’s News in Earnings: How Car Companies Are Prepping for Tariffs
Wed, 07 May 2025
Bonus Episode for May 7. Big automakers are bracing for tariffs. General Motors, Ford, Stellantis and Tesla say they’re strategizing to address possible price increases and supply-chain disruptions. Automotive regulatory reporter Ryan Felton analyzes the latest earnings results from car companies to explain what they’re doing and what it could mean for customers. Julia Carpenter hosts this special bonus episode of What's News in Earnings, where we dig into companies’ earnings reports and analyst calls to find out what’s going on under the hood of the American economy. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the key themes in this earnings season for automakers?
Thank you. Hey listeners, it's Wednesday, May 7th. I'm Julia Carpenter for The Wall Street Journal, and this is What's News in Earnings, our look at some of the big themes standing out this earnings season. Today, we're talking about automakers. It certainly hasn't been a quiet few months for big automotive companies like Ford, Stellantis, General Motors, and Tesla.
Chapter 2: How are automakers responding to tariffs?
They've been the target of Trump administration tariffs, and the back and forth with the White House has dominated the news cycle. So how are the companies responding? And what will it mean for customers? Ryan Felton covers automotive regulatory issues and the car company Stellantis for The Wall Street Journal. And he's here to explain all that's happening across the sector. Ryan, good to see you.
Thanks so much for having me on.
We've now seen earning reports from big automakers like Ford, Tesla, General Motors, Stellantis. All four mentioned tariffs. Can you tell me more about how executives addressed this concern and talked about what it means for the future?
Hedging is probably the best way to put it. The major automakers pulled back on their forecast for the rest of the year, projecting a lot of additional costs in the billions of dollars to compensate for the tariffs and then just trying to start figuring out how to
get production set up in a way to minimize the tariff liability, which I think at this point has definitely been described as a bit of a challenge because things are continuing to evolve at the administration and how they're trying to set this up as well, including as recently as within the past week.
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Chapter 3: What does General Motors plan to do about tariff costs?
General Motors said they're expecting $4 billion to $5 billion in tariff costs this year, and that could cut net profit by as much as a quarter. Those are giant numbers. What is GM planning to do about them?
Yeah, the main things that they put out were cutting spending for one part and then increasing production where they can. There's been a lot of talk in recent days, in particular from the United Auto Workers, which has a big representation at GM about how much extra capacity these American automakers already have to boost production. There's some...
It's a very simplified way of explaining that extra capacity. But with all that said, GM did say this week that's planning to build more profitable pickup trucks at a factory in Indiana and start trying to make more electric vehicles, batteries in the U.S. and then just trim costs wherever else it can.
And Stellantis, which I know you cover, is, of course, in the midst of this big transition period. They're still looking for a new CEO. Right. Their CEO left late last year. What did the executives share about plans there?
Chapter 4: What are Stellantis' strategies amid leadership changes?
Yeah, so they're still planning to name their CEO at some point before the end of the first half. They say they're on track for that. But they, too, are in a difficult position because they make a lot of their profitable, bigger pickup trucks for the market in Mexico. So they have to start thinking about making some changes as to where some of their...
more popular, more profitable products are made and finding ways to trim costs on those in particular. And at the same time, they have said that they're planning to reopen a factory in Illinois, which it's not something that you can just do overnight.
I'm thinking about everything you've just described with Stellantis. A lot of these challenges seem to have broader implications.
The way that I always think about cars in the broadest sense is it's the second biggest thing that most people buy. People in bigger cities may not need a car, but 80, 90 percent of the public does. It really complicates things for a lot of consumers downstream. And that partially explains, I think, why you saw sales spike the way that they did the past couple of months.
Chapter 5: How do these tariff challenges affect consumers?
There was some effort by companies to offer promotions and the like to kind of reel people in before this essentially necessary deadline.
Tesla reported pretty weak results, some of the weakest posted in years. 71% drop in net income during its most recent quarter. And of course, Elon Musk has been spending more time at the White House. What's happening with Tesla? How is this impacting the company? And what is it saying it's going to do next?
That's the most standout item from their call is that Elon says he's going to be devoting more time to the company. But at the same time, they still are preparing to launch a new updated version of the Model Y SUV, which is their top selling vehicle. So that was partially what they said was to explain for the sales drop off.
But still, at the same time, a lot of people are starting to come around to the idea that they've basically had the same models for years now, and that maybe is starting to impact consumer appetite for it. But that said, Tesla told investors that it's planning to introduce what they're calling more affordable models, which has been a bit of a mystery. What exactly that is.
It could be a brand new car, possibly what it was long hoped for. But now the expectation is that it'll be an even more stripped down version of the Model Y and Model 3.
Ryan, I wanted to ask you about the possibility of supply chain disruption. Ford mentioned it on their earnings call. It's a big concern for a lot of consumers, a concern for investors. Are we seeing it happen now or is this still a concern for the future?
Thinking about how the semiconductor crisis kind of played out, it was something that was percolating for a while and then it just blew up. What we've been seeing and talking with folks in the industry here is there has been a lot of back and forth for the better part of two months now between companies over who's paying what on the tariff. Are you paying everything? Am I paying everything?
Are we splitting it? And if those discussions break down, that's where you can start to have discussions. hiccups in supply chain challenges. One supplier, this isn't just hyperbole, it's been proven over time, one supplier can really wreak havoc on the entire industry. There's a lot of really specialized components and only so many companies that make them.
And so if one goes down, it can immediately become a challenge.
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