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Long-term investing is the key to sustainable returns in the market. But if you bet on the wrong company (without diversifying your portfolio), you might be better off leaving your cash in the bank. With shares down by 38% over the last decade, Ford Motor (NYSE: F) is an example of a company that has consistently failed to generate shareholder value.
That said, chaos can sometimes create opportunities. The U.S. automotive industry is in flux as major players shift toward electric vehicles (EVs), and dramatic shifts in trade policy could transform the world's second-largest auto market into a protected industry for domestic players. Let's dig deeper to explore how Ford might navigate these challenges.
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Could tariffs boost Ford's brand?
As an iconic American brand, Ford can be expected to benefit from consumer patriotism. Management has leveraged this advantage in the face of Washington's new 25% tariff on imported cars. Despite boasting a significant international supply chain, the company appears to be leaning into the resurgent "made in America" agenda.
According to the Detroit Free Press, Ford has launched an ad campaign touting its role in American manufacturing. The company is also offering employee pricing discounts on its 2024-2025 models, possibly in an effort to clear out inventory and capture market share ahead of potential disruptions. This move stands in stark contrast to European rival Volkswagen, which has halted some shipments to the U.S. and plans to put import-fee stickers on its cars to show the impact of the new policy.
However, while Ford's strategy appears promising in the near term, it will be challenging to sustain, especially if the planned 25% tariffs on auto parts are implemented. The company may not be as American as it appears on the surface.
How American is Ford, really?
Like many U.S. automakers, Ford has leveraged opportunities, such as the North American Free Trade Agreement (NAFTA), to expand its supply chains and benefit from lower wages and healthcare costs in the U.S. and Canada. While the company claims to assemble nearly 80% of its vehicles in the U.S., its cars utilize manufactured parts from around the world. For example, Ford's iconic F-150 pickup truck has only around 60% domestic content, despite being assembled in Dearborn, Michigan.
Ford's reliance on imported parts could lead to increased prices across the board. And even if tariffs end up hurting its rivals more, the overall industry could shrink and margins could narrow until supply chains can be reworked. Furthermore, they could severely undermine Ford's EV strategy.