Ford Motor Co. CEO Jim Farley warned that if the federal government under President Donald Trump repeals provisions of the Biden administration's Inflation Reduction Act like the electric vehicle battery production tax credits, the company could have to look at layoffs.

"We've already sunk capital — even though we've rationalized it — in battery production and assembly plants all through Ohio, Michigan, Kentucky and Tennessee," Farley said Tuesday during a fireside chat covering the "cost and chaos" of the Trump administration's tariffs approach, Ford's cost structure and more at the Wolfe Research Auto, Auto Tech and Semiconductor Conference. "And many of those jobs will be at risk if the IRA is repealed."

The Dearborn automaker is building four U.S. battery plants, most of which are in traditionally more Republican states that helped send Trump back to the White House. Three are with Ford's joint venture partner, Korea-based SK On Ltd., in Tennessee and Kentucky. The projects represent nearly 11,000 jobs that prompted Tenn. Gov. Bill Lee to say in 2021 when the $11.4 billion investment was announced that his state would "lead the future of the automotive industry and advanced manufacturing." The first plant in Kentucky is set to launch this year.

A fourth battery plant focused on a lower-cost battery chemistry is an entirely Ford-owned plant in Marshall in south-central Michigan, which flipped red in the 2024 election, that's scheduled to open in 2026 and create 1,700 jobs.

Former President Joe Biden signed the IRA into law in 2022 as an economic booster and to spur investment into EVs. In addition to offering up to $7,500 tax credits to buyers of plug-in vehicles, the legislation subsidizes EV battery manufacturing in the United States. Battery cells, which store and release energy needed to power EVs and are the vehicle's most expensive part, are each eligible for a credit of $35 per kilowatt-hour of energy they can store.

On his first day in office, Trump signed an executive order for the government to consider "the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase by individuals, private businesses, and government entities alike by rendering other types of vehicles unaffordable."

The order also directed the government to stop funding an EV charging station initiative, a move that is being challenged in court over whether the president has the authority not to execute spending directed by Congress. An attempt to halt the tax credit provisions could face similar challenges if not ordered by Congress.

The production credits represent major savings for automakers and are a key part of Ford's plans to offer low-cost EVs in the coming years. That's essential, Farley said, to increasing EV adoption.

"We believe that EV demand is still out there," Farley said, "hat there is a very underserved group of people on the super affordable where actually running an EV is cheaper than the ICE product, but these very large EVs that cost $50,000, $60,000, $70,000 — we don't believe it."

Ford last week said it expects to lose up to $5.5 billion on its Model e EV division in 2025 even before policy changes. The production tax credit will be most beneficial in the latter half of the year after the launch of production at the joint venture battery plant in Kentucky, but changes to the program would be "very material," House said.

The Blue Oval last year scrapped plans for an all-electric three-row SUV, saying it would be unprofitable. Its next EV launch will be in 2026 with a commercial van, followed in 2027 with midsize and full-size trucks.

Still, Ford already has made substantial investments for these battery plants, noted David Whiston, analyst at financial services firm Morningstar Inc.

"The job loss is probably more of a degree of loss rather than a complete cancellation of BlueOval City," Whiston, referencing the name of Ford's EV manufacturing campus in Tennessee, said in an email, "because I think they’d just slow their EV investing down further rather than cancel things forever."

The possible removal of the production tax credits adds to what already has been an expensive and hectic three weeks under Trump, Farley said. The Ford CEO will be visiting Washington, D.C., on Wednesday for the second time in that period.

"They need to understand that there's a lot of policy uncertainty here," Farley said. "But in the meantime, we're scrambling to manage the company as professionals, and we're in a global race."

Trump last week paused 25% tariffs on Canada and Mexico until March after striking deals regarding border security and measures to address illegal drug flows. On Monday, he announced 25% tariffs on aluminum and steel, two major material expenses for automakers.

Ford sources 90% of its aluminum and steel from the United States, Chief Financial Officer Sherry House said. But that doesn't mean it won't go unscathed.

"Our suppliers have international sources for aluminum and steel, so that price will come through," Farley said, "and there may be a speculative part of the market where prices come up, because the tariffs are even rumored. So we'll have to deal with it. And that's what I'm talking about: cost and chaos. It's like a little here, a little there, a couple weeks or couple months of vehicles crossing the border, components crossing the border."

In March 2018, when Trump instituted tariff a 25% tariff on steel and a 10% aluminum duty, Detroit automakers said the levies added roughly $1 billion in cost to their operations.

"Ford is indicating they are not sure how much they’ll pass through to dealers and in turn to consumers," Whiston said, "because they are talking about testing price elasticity to find that out."

Aside from some inventory adjustments, Ford hasn't taken any major steps surrounding tariffs, House said, especially when it comes to those threatened on Canada and Mexico; Farley said those have the potential to "blow a hole in the U.S. industry that we have never seen." He emphasized most of Ford's vehicles and components are in compliance with the United States-Mexico-Canada trade agreement Trump signed in 2020.

"It gives free rein to South Korean and Japanese and European companies that are bringing one and a half to 2 million vehicles into the U.S. that wouldn't be subject to those Mexican and Canadian tariffs," Farley said. "It would be one of the biggest windfalls for those companies ever."

General Motors Co. executives had a more muted response to the tariffs. The Detroit automaker expects 30-50% of duty costs could be mitigated without capital expenditures, CEO Mary Barra said during an on-stage conversation at the Wolfe conference.

With respect to aluminum and steel, Chief Financial Officer Paul Jacobson noted about a third of GM's steel is contracted with a fixed price. Another third is based on indexing over one or two years, creating a lag time before tariffs and price increases could come into play.

"There's probably going to be an increase in costs related to market prices that should subside over time," Jacobson said. "We're making sure that we're preparing for that the best we can, so we'll be looking to our suppliers and our partners."

GM reduced product sitting at its international plants by 30-40% ahead of Inauguration Day, Jacobson said, but other than that, changes in production footprint aren't happening until there's more visibility on whether these policies could stick.

Ford and GM shares were slightly down in afternoon trading on Tuesday. Ford last week forecasted adjusted operating profit of $7 billion to $8.5 billion in 2025, and GM is predicting adjusted earnings to be in a range of $11.2 billion to $12.5 billion. Neither guidance accounted for tariffs, given the unknowns.

"Tariffs (are) on everyone's mind as this is the biggest X variable for Ford, GM and Stellantis," said Daniel Ives, analyst at investment firm Wedbush Securities Inc. "Farley, it's his worst nightmare — the tariffs — but we believe the bark will be worse than the bite when it's all said and done. Ford is navigating a very rocky road and tariffs are a four-letter word in the 313 area code if they go into effect."

Despite the chaos, Farley also struck a positive note on what the president's policies could yield: "President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation in the U.S. And if this administration can achieve that, it would be one of the most signature accomplishments so far."

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