Q3 2025 Ford Motor Co Earnings Call

Speaker #1: Good day . My name is Layla and I will be your conference operator today . At this time , I would like to welcome you to the Ford Motor Company .

Operator: Good day, everyone. My name is Leila, and I will be your conference operator today. At this time, I would like to welcome you to the Ford Motor Company Third Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, and if you have joined via the webinar, please use the raised hand icon, which can be found on the bottom of your webinar application. If you have joined by phone, please dial star nine on your keypad to raise your hand. At this time, I would like to turn the call over to Lynn Antipas Tyson, Chief Investor Relations Officer.

Speaker #1: Third quarter 2020 Earnings Conference Call . All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .

Speaker #1: If you would like to ask a question during this time, and if you have joined via the webinar, please use the Raise Hand icon, which can be found at the bottom of your webinar application.

Speaker #1: If you have joined by phone , please dial star nine on your keypad to raise your hand . At this time , I would like to turn the call over to Lynn Antipas , Tyson chief Investor Relations Officer .

Speaker #2: Thank you , Layla , and welcome to the Ford Motor Company's third quarter 2020 earnings call . With me today are Jim Farley , president and CEO .

Lynn Antipas Tyson: Thank you, Leila, and welcome to the Ford Motor Company's Third Quarter 2025 Earnings Call. With me today are Jim Farley, President and CEO; Sherry House, CFO; Andrew Frick, President, Ford Blue and Ford Model e; and Kumar Galhotra, Chief Operating Officer. Joining us for Q&A will be Kathy O'Callaghan, CEO of Ford Credit; and Steve Croley, Chief Policy Officer and General Counsel. Also with us is Alicia Bullard-Davis, President of Ford Pro. Jim will give a high-level overview, followed by Kumar on industrial progress, Andrew on market dynamics, and Sherry on our financial review and guidance. We'll be referencing non-GAAP measures today. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You can find the deck at shareholder.ford.com. Our discussion also includes forward-looking statements; our actual results may differ.

Speaker #2: Sherry House CFO , Andrew Frick president , Ford Blue and Marley and Kumar Galhotra chief operating officer . Joining us for Q&A will be Kathy O'Callahan , CEO of Ford Credit , and Steve Crowley , chief Policy officer and general counsel .

Speaker #2: Also with us is Alicia Davis , president of Ford Pro . Jim will give a high level overview , followed by Kumar on industrial progress , Andrew on market dynamics , and Sheri on our financial review and guidance .

Speaker #2: We'll be referencing non-GAAP measures today . These are reconciled to the most comparable US GAAP measures in the appendix of our earnings deck .

Speaker #2: You can find the deck at shareholder dot com , our discussion also includes forward looking statements . Our actual results may differ . The most significant risk factors are included on page 20 of our deck .

Lynn Antipas Tyson: The most significant risk factors are included on page 20 of our deck. Unless otherwise noted, all comparisons are year over year. Company, EBIT, EPS, and free cash flow are on an adjusted basis. Upcoming IR engagements include Andrew Frick at the Scotiabank Conference in Toronto on November 18, and Sherry House at the Barclays Conference in New York on November 19. Now I'd like to turn the call over to Jim.

Speaker #2: Unless otherwise noted , all comparisons are year over year . Company Ebit , EPs and free cash flow are on an adjusted basis .

Speaker #2: Upcoming IR engagements include Andrew Frick at the Scotiabank Conference in Toronto on November 18th and Sherry House at the Barclays Conference in New York on November 19th .

Jim Farley: Thanks, Lynn. Before I get started on earnings, I wanted to welcome Alicia Bullard-Davis to our team and to all of you. Her leadership is critical as we build our incredible powerhouse, Ford Pro, into a durable product, software, services powerhouse. Alicia will cover Pro, starting on our fourth quarter earnings call. I'd like to thank the Ford team, as well as our suppliers and all of our dealers, for delivering a very strong quarter. We not only solidly beat expectations, but our underlying performance has us on track to raise our full-year 2025 EBIT guidance if it weren't for the impact of the Novelis fire in Oswego, New York. Sherry will provide details of the financial impact of the Novelis fire, and I'm very pleased with our team's swift and decisive response to this challenge.

Jim Farley: We immediately mobilized a dedicated crisis team, worked around the clock with Novelis to secure alternative aluminum sources for our operational lines and accelerate the plant's recovery. Several top leaders and I personally visited the site to support all of these efforts. In addition, we are adding up to 1,000 new jobs to increase F-Series production to recover lost volume and fulfill strong customer demands. We have made substantial progress in a very short timeframe in both reducing the 2025 impact and putting in place an exciting recovery plan for next year. Turning to our results, our Ford+ plan delivered a record $50.5 billion in revenue and $2.6 billion in adjusted EBIT. Once again, we made meaningful progress in cost and quality, thanks to the disciplined execution of our industrial team. Kumar will share more details.

Jim Farley: I'd like to thank President Trump and his team for the recent tariff policy developments, which are favorable to Ford as the most American auto manufacturer. Credit based on our large U.S. manufacturing volume will allow us to offset tariffs on imported auto parts we need for our strong American production and manufacturing base. In addition, tariffs leveling the playing field for those imported medium and heavy-duty trucks is a positive for Ford because we are no longer disadvantaged for building every single one of our Super Duty chassis cabs here in the United States. We also continue to watch for relief from tailpipe emissions, which may come as soon as the end of this year. Federal legislation has already scaled back California's ZEV rules, and we anticipate a meaningful reduction in federal requirements next year. We are adjusting our product mix accordingly.

Jim Farley: Our Ford+ plan is designed to win in the market. Among four key trends, markets are more regional now. We all need tailored strategies. Customers are more fragmented between retail and commercial. This requires unique services and digital solutions for both. The competition is getting tougher. Namely, the Chinese OEMs are expanding globally, and the industry faces lower returns due to the EV overcapacity and global pressures. Thankfully, our strategy plays to our strengths at Ford: iconic work vehicles, passion products like Mustang, and the off-road franchises like Bronco and Raptor. We're also prioritizing hybrids across our lineup, including the development of extended-range hybrid options. In the near term, I believe EV adoption will now only be about 5% of the U.S. market, but this is going to grow, especially for affordable EV vehicles.

Jim Farley: We are well positioned for this with the universal EV platform, which underpins digitally advanced, very spacious, and appealing products that start at around $30,000. This is not a distant plan. It's right around the corner for us at Ford. Sourcing is at 95% complete now. We are testing vehicles. We'll begin installing equipment in Louisville for the UAV later this year, and we are on track to start production of our LFP cells at the Marshall, Michigan, plant later this year. To compete, we need innovation and hyper-cost efficiency. In this capital-intensive environment, smart partnerships will be essential to us. Our largest near-term opportunity is closing that cost gap and achieving world-class quality. Kumar?

We are well positioned for this with the universal EV platform, which underpins digitally advanced, very spacious, and appealing products that start at around $30,000.

This is not a distant plan; it's right around the corner for us at Ford.

We begin installing equipment in Louisville for the UEE later this year. We are on track to start production of our LFP cells at the Marshall, Michigan plant later this year.

To compete.

We need innovation and hyper cost efficiency. And as a capital-intensive environment, smart partnerships will be essential to us.

And our largest near-term opportunity is closing that cost gap and achieving world-class quality.

Kumar Galhotra: Thank you, Jim. Our industrial platform is delivering tangible progress in quality, cost, and modernization. Improving quality is the single biggest driver to close our cost gap. Better quality lowers warranty expense and reduces recalls. Four key elements are essential for sustainable warranty cost reduction: seamless launch execution, minimal defects, greater reliability and durability, and time. You need time to clear the car part of old issues. It all starts with a clean launch. A bad launch creates years of warranty and recall problems. Over the past two years, we have radically improved our launch quality. We are on track for best-in-class performance across six nameplates, with three more nameplates in the top quartile. This is based on JD Power warranty analytics data. Also, Ford was the most awarded brand in JD Power 2025 U.S. Initial Quality Study.

Kumar.

Thank you, Jim.

Our industrial platform is delivering tangible progress in quality, cost, and modernization.

Improving quality is the single biggest driver to close our cost gap.

Better quality lures warranty expense and reduces recalls?

4. Key elements are essential for sustainable warranty cost reduction.

Seem less launch execution.

Minimum defects, greater reliability and durability.

And time.

You need time to clear the car part of world issues.

It all starts with a clean launch.

A bad launch creates years of warranty and recall problems.

Over the past two years, we have radically improved our launch quality.

We are on track for best-in-class performance across six nameplates, with three more nameplates in the top four tile.

This is based on Jetty Power warranty analytics data.

Kumar Galhotra: We're also catching defects earlier in the process through rigorous engineering reviews, where leaders sign off to ensure accountability and fixes happen in real time. Our next focus is on long-term reliability and durability. We've identified the specific parts and systems needed to achieve industry-leading reliability. To get there, we've implemented a new powertrain testing regimen that is up to seven times longer than before. It includes extreme use cases that help us find issues we previously only found years after the vehicle was in the field. Now, it takes time for these improvements to improve our recall numbers, as older models have to work their way out of the system. We're already seeing our recall costs shift towards more aged vehicles. Since the peak recall period is in years three to five, we expect a meaningful improvement soon.

Also, Ford was the most awarded brand in J.D. Power's 2025 U.S. Initial Quality Study.

We're also catching defects earlier in the process through rigorous engineering reviews where leaders sign off to ensure accountability and fixes happen in real time.

Our next focus is on long-term reliability and durability.

We've identified the specific parts and systems needed to achieve industry-leading reliability.

To get there. We've implemented a new powertrain testing regimen.

That is up to 7 times, longer than before.

It includes extreme use cases that help us find issues. We previously only found them years after the vehicle was in the field.

Now, it takes time for these improvements to improve our refund numbers.

As older models, have to work their way out of the system.

But we're already seeing a recall costs shift towards more aged vehicles.

Kumar Galhotra: On cost, we delivered another quarter of year-over-year improvement and are on track for a net $1 billion improvement this year, excluding the impact of tariffs. Lower material cost, freight and duty efficiency, and lower warranty contributed to this. This is the result of a fundamental change in our team's operational DNA. We have dedicated workstreams reducing the cost of parts, optimizing repair times, and transforming how we negotiate with our suppliers. We're also modernizing our facilities and IT to unlock the next level of efficiency. We are systemically deploying AI across the entire industrial system. For example, we have significantly improved CAD loading times to less than a minute. We have added 900 AI-powered cameras across our plants to detect quality issues at the source and help us mitigate supply disruptions. Thank you. Now over to Andrew.

And since the peak recall period is in year 3 to 5, we expect a meaningful Improvement soon.

On cost.

We delivered another quarter of year-over-year improvement and are on track to deliver track for a net 1 billion Improvement this year. Excluding the impact of tariffs.

Lower material cost.

Create and Duty efficiency and lower warranty, contributed to this.

This is the result of a fundamental change in our team's operational DNA.

We have dedicated work streams reducing the cost of Parts optimizing repair times and transforming how we negotiate with our suppliers.

We're also modernizing our facilities and it to unlock the next level of efficiency. We are systemically deploying AI across the entire industrial system.

For example, we have significantly improved CAD loading times to less than a minute.

and we have added 900 a powered cameras across our plants to detect quality issues at the source and help us mitigate Supply disruptions

Andrew Frick: Thank you, Kumar. I will start with Ford Pro, which is thriving due to our diverse vehicle lineup, service parts penetration, and growth in our integrated software and services. Our specialized dealer network is a significant competitive advantage that is difficult to replicate. Dealers recognize the importance of customer uptime, and they continue to invest, adding another 1,700 service bays and 500 mobile service vans over this past year. This makes Ford the largest mobile fleet in the U.S., providing a structural advantage and brand differentiation for both Pro and retail customers. We have intentionally diversified our revenue streams for more durable profits. For example, softness in government sales this year was offset by strength in small to medium businesses, or SMB. Our channel mix is now well balanced across large corporations, SMBs, and government and rental fleets.

Thank you. Now over to Andrew.

Thank you, Kumar. I will start with Ford Pro, which is thriving due to our diverse vehicle lineup.

Service Parts, penetration and growth in our integrated software and services.

Our specialized dealer network is a significant competitive advantage that is difficult to replicate.

Dealers recognize the importance of customer uptime, and they continue to invest in adding another 1,700 service bays and 500 mobile service vans over this past year. This makes Ford the largest mobile fleet.

in the US, providing a structural advantage and brand differentiation for both Pro and Retail customers.

We have intentionally diversified our revenue streams for more durable profits. For example, softness in government sales this year was offset by strength in small to medium businesses, or SMB.

Andrew Frick: In software, Pro's paid subscriptions grew 8% to 818,000 subscribers, and we're also seeing growth in our ARPU and attach rates. This is producing a flywheel effect. For example, customers who subscribe to our fleet software have a service parts capture rate up to 20 points higher, which also helps us win sales from new competitors in multi-meg fleets. There is upside to software via strategic partnerships. Our new partnership with ServiceTitan, the largest software provider to the trades, is a notable example of this. We are embedding our real-time vehicle data directly into their workflow, combining the insights from Ford Pro's data services with ServiceTitan's Fleet Pro software for a real-time view of fleet vehicle data. Customers will be able to manage vehicle maintenance, streamline services, and simplify repairs. Now, in our home market, industry conditions were strong this quarter, with a SAR of 17 million and positive pricing.

Our channel mix is now well balanced across large corporations, SMBs, government, and rental fleets.

In Software Pros, paid subscriptions through 8% to 818,000 subscribers.

Seeing growth in our rpu and attach rates.

This is producing a flywheel effect. For example, customers who subscribe to our Fleet software have a service Parts capture rate up to 20 points, higher

Which also helps us win sales from new competitors in multi- make fleets.

There is upside to software via strategic partnerships. Our new partnership with ServiceTitan, the largest software provider to the trades, is a notable example of this.

We are embedding our real-time vehicle data directly into their workflow, combining the insights from Ford Pro data services with ServiceTitan's Fleet Pro software for a real-time view of fleet vehicle data.

Customers will be able to manage vehicle maintenance, streamline services, and simplify repairs.

Andrew Frick: Our total U.S. share grew to 12.8%, with growth outpacing the industry despite our phase-out of the Edge, driven by key products like F-150, Bronco, Explorer, and Expedition. In fact, the all-new Expedition is red hot, gaining over three points of segment share, with 75% of customers choosing high-end trims like Tremor. We continue to lead the hybrid truck market with about 70% share. Lastly, our ample inventory does position us for a strong fourth quarter and helps to insulate our retail sales from the near-term impact of Novelis. We will end this year with leaner retail stock levels between 55 to 59 days supply, with gross stock down 11%. As we look at 2026, even with our net recovery, we forecast being down roughly another 6% to about 520,000 units of gross stock. A disciplined approach, yet still leaving us headroom to look for more market opportunities.

Now, in our home market industry, conditions were strong. This quarter, with a SAR of 17 million and positive pricing.

Our total U.S. share grew to 12.8%, with growth outpacing the industry, despite our phase-out of the Edge, driven by key products like the F-150, Bronco, Explorer, and Expedition.

In fact, the only Expedition is red hot, gaining over 3 points of segments, share with 75% of customers, choosing high-end trims, like tremor.

And we continue to lead the hybrid truck Market with about 70%, share.

Lastly, our ample inventory does position us for a strong fourth quarter and helps to insulate our retail sales from the near-term impact of novellas.

We will end this year with leaner retail stock levels between 55 to 59 days' supply.

with growth stocks down, 11%

Andrew Frick: Now I'd like to turn it over to Sherry.

Sherry House: Thank you, Andrew. Ford continues to make great strides in our journey to build a higher growth, higher margin, more capital-efficient, and durable business. That progress is evident in our ongoing performance. In the third quarter, our strong product lineup drove global revenue growth of over 9%, roughly 1.5 times faster than our growth in wholesales. We delivered adjusted EBIT of $2.6 billion, flat with the prior year, despite absorbing a net tariff headwind of $700 million. The durability of our business is strengthening. Over the past three years, total company EBIT from software and physical services has grown by over 20%. Our revenue growth has diversified across regions, segments, channels, and software and physical services. Furthermore, our industrial system has delivered on their commitment to consistently deliver cost improvements, excluding the impact of tariffs.

As we look at 2026, even with our net recovery, we forecast being down roughly, another 6% to about 520,000 units of growth, stock, a discipline approach yet. Still leaving us Headroom to look for more Market opportunities. Now, I'd like to turn it over to Sherry.

Thank you, Andrew for continues to make great strides in our journey to build a higher growth, higher margin, more Capital, efficient and durable business. And that progress is evident in our ongoing performance. In the third quarter. Our strong product lineup through a global Revenue growth of over 9%, roughly 1 and a half times faster than our growth in host sales. And we delivered a just it even of 2.6 billion dollars flat with the prior year, despite absorbing a net tier of headwind of 700 million.

The durability of our business is strengthening over the past 3 years. Total company ebit from software and physical Services has grown by over 20%.

Our revenue growth has diversified across regions, segments, channels, and software and physical services.

Sherry House: Total company adjusted free cash flow was strong at $4.3 billion in the third quarter, with $5.7 billion year to date. We ended the quarter with nearly $33 billion in cash and $54 billion in liquidity. Our balance sheet is a competitive advantage. We are disciplined in our capital allocation strategy, and we are focused on the areas driving expected profitable growth, such as our UAV platform launching in 2027. We remain committed to our investment-grade rating in returning capital to shareholders. Today, we announced the declaration of our fourth quarter regular dividend of $0.15 per share, payable on December 1 to shareholders of record on November 7. Now, turning to the segments, Ford Pro delivered another solid quarter. Revenue was $17.4 billion, and EBIT was $2 billion, with a robust double-digit margin. Revenue and volume grew by 11% and 9% respectively.

Furthermore, our Industrial Systems has delivered on their commitment to consistently deliver cost improvements, excluding the impact of tariffs.

Total company adjusted free cash flow was strong at $4.3 billion in the third quarter, with $5.7 billion year to date.

We ended the quarter with nearly 33 billion in cash, in 54 billion in liquidity.

Our balance sheet is a competitive advantage. We are disciplined in our capital allocation strategy and we are focused on the areas driving expected profitable growth, such as our UAB platform launching in 2027.

We remain committed to our investment grade rating in returning, Capital to shareholders.

Today we announced the Declaration of our fourth quarter, regular dividend of 15 cents per share payable on December 1st to shareholders of Records on November 7th.

Now, turning to the segments.

Ford Pro delivered another solid quarter.

Revenue was 17.4 billion. In ebit, was 2 billion with a robust double-digit margin.

Sherry House: Growth in EBIT was driven by volume and continued improvement in warranty and material cost, partially offset by tariff impacts and pricing normalization in Europe and North America. Ford Model e delivered both revenue and volume growth, driven by new product introductions in Europe. EBIT losses increased due to lower net pricing and an increase in spending on our next-generation vehicles. Let me give you additional color on Model e. Year to date, Model e is at a $3.6 billion loss. Roughly $3 billion of this is from our first-generation products: Mach-E, Lightning, Puma, Explorer, and Capri. The balance is investment in our next-generation vehicles, including our UAV platform. The only practical way to improve the profitability of our Gen 1 vehicles is through one or more of the following: pricing, new cost reductions, and improved fixed cost leverage.

Revenue and volume grew by 11% and 9%, respectively.

Growth in EBIT was driven by volume and continued improvement in warranty and material costs.

Partially offset by tariff impacts in pricing normalization, in Europe and North America.

Ford Model E.

Delivered, both revenue and volume growth driven by new product introductions in Europe.

EBIT losses increased due to lower net pricing and an increase in spending on our next-generation vehicles.

Let me give you a additional color of Model E.

Year to date, Model E is at a $3.6 billion loss.

Million of this is from our first generation products.

Mackie Lightning, Puma, Explorer, and Capri.

The balance is investment in our next Generation Vehicles, including our UAV platform.

The only practical way to improve the profitability of our Gen 1 vehicles is through one or more of the following.

Sherry House: Given current industry trends, it's clear scaling fixed costs is a challenge for most of the industry. You can see this in the multitude of recent program cancellations and charges globally. We've been proactive. Over two years ago, we reduced our planned battery capacity by 35%. Last year, we canceled our three-row program, making room for additional commercial vehicle volume. Clearly, near-term U.S. customer and market realities for EVs continue to evolve. We will have more to share about how we are adapting to these changes at a later date. Ford Blue achieved EBIT of $1.5 billion, with revenue growth exceeding the rate of wholesale unit growth, highlighting the strength of our diverse product lineup. Higher costs are driven by tariffs, which muted progress in warranty. Adverse exchange was also a headwind, driven by a weaker U.S. dollar against the euro and Thai baht.

Pricing new cost reductions and improved. Fixed cost. Leverage.

Given current industry trends, it's clear scaling fixed costs is a challenge for most of the industry. You can see this in the multitude of recent program cancellations and charges globally.

We've been proactive for over two years. We reduced our plan battery capacity by 35% in the last year, and we canceled our three-row programs, making room for additional commercial vehicle volume.

Clearly near-term Us customer and Market realities for EVS continue to evolve.

We will have more to share about how we are adapting to these changes at a later date.

Ford Blue achieved EBIT of $1.5 billion.

With Revenue growth exceeding, the rate of wholesale unit growth.

Highlighting the strengths of our diverse product lineup.

Higher costs are driven by tariffs, which muted progress and warranty.

Sherry House: Ford Credit delivered over $600 million of EBT, up 16%, reflecting improved financing margin. Ford Credit also made a $350 million distribution in the quarter. We continue to originate a high-quality book, with U.S. retail and lease FICO scores again exceeding 750 for the quarter. Let me turn to our 2025 outlook. Excluding Novelis, our underlying business continues to perform well. In fact, we are tracking at the high end of the adjusted EBIT guidance range we provided in February of between $7 billion and $8.5 billion. This original guidance was provided before tariffs, which we have fully absorbed. Additionally, adjusted free cash flow is trending better than the guidance we provided in July of between $3.5 billion and $4.5 billion. Between 2025 and 2026, we expect Novelis to be a headwind of $1 billion or less.

Adverse exchange was also a headwind driven by a weaker U.S. dollar against the euro in Thai baht.

For credit delivered, over 600 million of EBT up, 16% reflecting improved financing margins.

For credit, we also made a $350 million distribution in the...

We continue to originate a high-quality books with us retail in lease FICO scores again. Exceeding, 750, for the quarter.

So, let me turn to our 2025 outlook.

Excluding novellas our underlying business continues to perform well.

In fact, we are tracking at the high end of the adjusted EBITDA guidance range we provided in February of between $7 billion and $8.5 billion.

This original guidance was provided before tariffs, which we have fully absorbed.

Additionally, adjusted free cash flow is turning better than the guidance. We provided in July of between 3 and a half and 4 and a half billion dollars.

Sherry House: For 2025, we expect an adjusted EBIT headwind of $1.5 billion to $2 billion in the fourth quarter for Novelis. We currently have line of sight to mitigate at least $1 billion in 2026, and we are working to improve the situation further. We also expect an adjusted free cash flow headwind of $2 billion to $3 billion in the fourth quarter. Keep in mind that production disruptions result in an oversized short-term impact on our working capital, which will reverse next year. Given the recent announcements by the administration, we now expect tariffs will be a $1 billion net headwind for 2025, down from $2 billion. This brings our updated adjusted EBIT guidance for 2025 to between $6 to $6.5 billion, with adjusted free cash flow of between $2 and $3 billion. Our full-year outlook also assumes U.S. industry SAR of about 16.8 million units, U.S.

Between 2025 and 2026, we expect novellas to be a headwind of $1 billion or less.

For 2025, we expect an adjusted EBIT headwind of $1.5 billion to $2 billion in the fourth quarter for Nalis.

And we currently have line of sight to mitigate at least 1 billion dollars in 2026 and we are working to improve the situation further.

We also expect an adjusted free. Cash flow headwind of 2 to 3 billion dollars in the fourth quarter.

Keep in mind, the production disruptions result in an oversized short-term impact on our working capital which will reverse next year.

Given the recent announcements by the administration. We now expect terrorists will be a 1 billion dollar net headwind for 2025.

Down from 2 billion dollars.

This brings our updated adjusted EBITDA guidance for 2025 to between $6 billion to $6.5 billion, with adjusted free cash flow of between $2 billion to $3 billion.

Sherry House: industry pricing of about 0.5%, a net cost improvement of $1 billion, excluding the impact of tariffs, and lastly, capital expenditures of about $9 billion. Turning to 2026, while it's premature to give guidance, I want to share some puts and takes as you think about the industry and Ford. First, we have line of sight to recover at least $1 billion related to Novelis. For tariffs, we expect a net full-year impact similar to 2025. For compliance, the evolving global emissions landscape is expected to eliminate 2026 compliance headwinds, thereby unlocking opportunities to optimize our mix of ICE, hybrids, and EVs and reduce reliance on credits. For costs, we plan to deliver another $1 billion of cost improvements across our industrial system, which will be redeployed to strategic accretive ICE and hybrid cycle plan actions.

Our full-year outlook also assumes U.S. industry sales of about 16.8 million units.

U.S. industry, pricing of about 0.5%.

And net cost improvement of $1 billion, excluding the impacted tariffs. Lastly, capital expenditures of about $9 billion.

Turning to 2026.

While it's premature to give guidance, I want to share some puts and takes as you think about the industry and Ford.

First, we have line of sight to recover at least $1 billion related to nollas.

For tariffs, we expect a net full-year impact similar to 2025.

For compliance, the evolving global admission landscape is expected to eliminate 2026 compliance headwinds, thereby unlocking opportunities to optimize our mix of ICE hybrids and EVs and reduce reliance on credits.

Sherry House: Additionally, UAV platform spending will continue to increase as we ramp our Marshall, Michigan LFP battery plant and change over to the Louisville assembly plant ahead of the 2027 launch. Before we go to Q&A, let me end with this: our underlying business is strong, and importantly, we are starting to more consistently execute and deliver our Ford+ plan. I'll now turn the call over to the operator.

Additionally, ueb platform spending will continue.

To increase as we ramp our Marshall lfp, battery plant and change over to the Louisville assembly. Plant ahead of 2027 launch.

Before we go to Q&A, let me end with this, our underlying business is strong. And importantly, we are starting to more, consistently execute and deliver our Ford plus plan.

I'll now turn the call over to the operator.

Operator: will now move to our question and answer session. If you have joined via the webinar, please use the raised hand icon, which can be found at the bottom of your webinar application. If you have joined by phone, please dial star nine on your keypad to raise your hand. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Your first question will come from the line of Joseph Spak with UBS. Please unmute and ask your question.

We'll now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. If you have joined by phone, please dial *9 on your keypad to raise your hand.

When you are called on, please unmute your line, and ask your question.

We will now pause a moment to assemble the queue.

[Analyst]: Thanks, everyone. Maybe just a couple of points of clarification. I guess I want to understand, you know, why, as of now, you only think you could recover about $1 billion of the impact from Novelis. Also, just in some maybe breaking news, there was a journal article which said Novelis plans to have the plant back up, you know, by the end of the year. Is that sort of in line with your thinking and considered in your outlook?

Your first question will come from the line of Joseph spak with UBS. Please unmute and ask your question.

Uh thanks everyone. Um maybe just um a couple of points of of clarification. Um

um,

1, I guess I want to understand, you know why? As of now you only think you could uh, recover about a billion dollars of the impact.

Um from novelis. And then also just in in some, maybe breaking news, there was a journal article, which said, um, novelis plans to have the plant back up. Um,

You know, by the end of the year. Um, so is that sort of in line with your thinking and considered in your outlook?

Kumar Galhotra: Yeah, thanks, Joe. This is Kumar. Thanks for the question, and thank you for your very thoughtful paper on this earlier. Yes, that is in line with our communication with Novelis. The hot mill, which is down now, will be operational in late November, early December. It'll then go through a quick ramp-up through December. Between now and the end of the year, we'll probably lose 90,000 to 100,000 units in the fourth quarter. We announced today that we will add a third shift at Dearborn Truck Plant and higher line speed at Kentucky Truck. Through those actions, we expect to make up roughly 50,000 of those 100,000 units in 2026.

Yeah, thanks, Joe. This is Kumar. Um, thanks for the question and, uh,

Thank you for your very thoughtful paper on this earlier.

Um, yes. That is in line with uh, our communication with novellis the Hotmail.

Which is down now will be operational in late. November early, December.

it'll then go through a

quick ramp up through December.

Um, between now and the end of the year, we'll probably lose 90,000 to 100,000 units in the fourth quarter.

We announced today that we will add a third shift at Durban truck plan.

Uh, and higher line speed at Kentucky truck.

So through those actions, uh, we expect to make up roughly 50,000 of those 100,000 units in 2026.

Jim Farley: I would just add, it's important to realize that the makeup capacity next year will largely depend on Ford's capacity makeup. Even if we have more availability of aluminum, the real lever for us is going to be our own upside. We're working through that. This is still early days. We'll have a lot more to update through this quarter and into next year's guidance. Please understand, that's not Novelis' restriction.

I would just add, um,

It's important to realize that the makeup capacity next year. Largely depend on Ford's capacity makeup.

Kumar Galhotra: Yeah, thanks, Jim. All F-Series plants were already running three crew, and Dearborn wasn't, and now it will run three crew as well. The factories are basically flat out.

[Analyst]: OK. Maybe just one more, and I guess it's unfortunate we keep on having to bring these things up, but maybe you could just update us on how you're viewing any potential disruption from the SNCX/Barilla chip impact and what kind of supply you have or alternative supply and whether there's anything considered for that as well.

Even if we have more availability of aluminum, the real lever for us is going to be our own upside. Um, and and we're working through that, this is still early days. We'll have a lot more to update through the through this quarter and into next year's guidance. But uh, please understand. That's not novellas. Uh restriction. Yeah, thanks Jim. All all have series plans were already running 3 through and dear 1 wasn't and now it will run 3 tour as well. So the factories are basically flat out.

Okay. Uh, maybe. Um

There's 1 more and I, I guess it's unfortunate, we, we keep on asking you to bring these things up, but maybe you can just up us on, um, how you're viewing any potential disruption from, um, this next area chip, uh, impact and what kind of Supply you have or alternative Supply and and whether there's anything considered um, for that as well.

Jim Farley: We see this as a political issue. We're working with U.S. and Chinese administrations. I was in D.C. yesterday, actually, and this issue was top of mind for every official we met in the U.S. government. They're very well aware of it, working to resolve it. These are fairly common parts, mature node semicomponents like diodes and transistors. We're maximizing our buy of these components. We got really good at doing that during the chip crisis. I think all the OEMs are doing the same thing. At the moment, the run-out dates look very close to the date when we may see a resolution. It's an industry-wide issue. A quick breakthrough is really necessary to avoid fourth quarter production losses for the entire industry. That's all I'm willing to say at this point.

We see this as a political issue. We're working with U.S. and Chinese administrations. I was in D.C. yesterday, actually, and this issue was top of mind for every official we met in the U.S. government. They’re very well aware of it and are working to resolve it. These are fairly common parts: mature node semiconductor components like diodes and transistors.

[Analyst]: OK. Appreciate it, Jim. Thank you.

We're maximizing our buy on these components. We got really good at doing that during the chip crisis. I think all the OEMs are doing the same thing at the moment. The runout dates look very close to the date when we may see a resolution. It's an industry-wide issue. A quick breakthrough is really necessary to avoid fourth quarter production losses for the entire industry. That's all I'm willing to say at this point. Yeah, appreciate you, Jim. Thank you.

Operator: Our next question will come from Dan Levy with Barclays.

[Analyst]: Hi. Good evening. Thank you for taking the questions. Kumar or Jim, I wanted to actually just go to the topic of warranty. Thank you, Kumar. I think you unpacked some of it. It looks like your warranty expense was better year over year. You're talking about $1 billion of better costs next year as well. I'm wondering if you could just update us at where we are on the path to breaking that cost curve on warranty. I know this is sort of the question that keeps on coming up. We've heard about the improvements in the JD Power survey and the efforts you're taking. When do we start to see this finally show up materially in the numbers?

Our next question will come from Dan Levy with Barclays?

Hi, good evening. Thank you for, uh, taking the questions. Um,

And thank you Kamar. Thank you unpacked, some of it. But um, looks like your your warranty expense was better. Um, year-over-year. You're talking about a billion dollars of better cost next year as well. And I'm wondering if you could just update us if you know where we are on the path to um breaking that cost curve on oriented. This is sort of the question that keeps on coming up, but we've heard about the, the improvements in the JD Power survey and and you know, the efforts you're taking but when do we start to see this finally show up, uh, materially in the numbers.

Kumar Galhotra: Thanks for the question. Let me make two points. First, the warranty is obviously made up of coverage and FSA costs. FSA costs are not simply a function of a number of units. For example, software, OTA repairs, and other repairs like that are significantly cheaper. As you mentioned, our initial quality has improved substantially. The reduction in those coverage costs is expected to offset any potential increase in FSA. I use the word potential increase intentionally because, given the large car part, it is somewhat difficult to precisely forecast the FSA number and the FSA cost. Next year, we expect the total cost, coverage plus FSAs, to also go down.

Uh, thanks for the question. Um,

let me make 2 points.

First, the warranties are obviously made up of coverage and FSA costs.

Um, FSA costs are not simply a function of number of units. Uh, for example, software otaa repairs and other repairs like that are significantly cheaper.

And as you mentioned, our initial quality has improved substantially.

And the reduction in those coverage costs.

Is expected to offset any potential increase in FSA and I use the word potential increase intentionally.

Because given the large car park.

Jim Farley: I also want to highlight our Q3 warranty costs were down year over year.

[Analyst]: Correct.

Sherry House: $450 million.

Jim Farley: Yeah, it was a really big achievement by the team, really seeing that coverages flow through, one of the reasons why we were able to offset the tariffs.

It is somewhat difficult to precisely forecast the FSA number and the FSA cost. But next year, we expect the total cost coverage plus FSA to also go down and also want to highlight our Q3 warranty costs for down year-over-year. Correct, $450 million. Yeah, is a really big achievement by the team. We’re really seeing that coverage flow through. One of the reasons why we’re able to offset the tariffs.

[Analyst]: Great. Thank you. As a follow-up, I wanted to ask a question about industry competitive dynamics. I know the incremental 50,000 units of capacity is really just to make up for some of the lost volume from 2025 here from the fire. You're raising your capacity. We know that your other competitors in trucks are taking some capacity actions as well. What is your comfort that the industry price discipline that we've seen can be maintained even with this incremental capacity coming online?

Thank you. Um, as a follow-up wanted to ask a question about

Uh, industry, competitive Dynamics. And I know the, the incremental 50,000 units of capacity is really just to make up for some of the the Lost, uh, the Lost volume from 205 here from the fire. Um, but you're, you're raising your capacity. We know that, uh, your other competitors in trucks are um, taking some capacity actions as well. Um, what is your comfort that the industry price discipline that we've seen can be maintained even with this incremental capacity coming online?

Kumar Galhotra: Yeah, Dan, it's Andrew. Thank you for the question. You know, as we look at the industry pricing this year, it's up about 0.5%, and we expect that to remain strong. When you look at the strength of some of the segmentation out there, like full-size pickups, it also remains very strong within the industry itself. We see strength as we move forward in those key segments, which are very important to us.

Jim Farley: The reason why we feel comfortable is when you look at the underlying segment drivers, fuel price, you know, construction, they're very strong for those segments. As well, our competitors and Ford have a relatively new lineup. We have a new Expedition, Navigator. We have a very still new F-150. The Super Duty is basically still brand new. We have a hybrid lineup that others don't have. I think it's a combination of our optimism about the freshness of our lineup, as well as the underlying drivers of the segmentation.

Yeah, Dan, it's Andrew. Thank you for the question. Uh, you know, as we look at the industry pricing this year, it's up about a half a point and we expect that to remain strong. Um, and when you look at the strength of some of the segmentation out there like full-size pickups, they it also remains very strong within uh within the industry itself. So we see strength as we uh move forward in those key segments which are very important to us. And the reason why we feel comfortable is when you look at the underlying segment drivers fuel price, you know construction, um, they're very strong for those segments and as well, our competitors and Ford have a relatively new lineup.

We have a new Expedition Navigator. We have a a very still new F-150. We we are. Uh the Superduty is basically still brand new and we have hybrid lineup that others don't have. So I think it's a combination of our optimism about the freshness of of our lineup, as well as the underlying drivers of the segmentation.

[Analyst]: Great, thank you.

Great. Thank you.

Operator: Your next question will come from Mark Delaney with Goldman Sachs.

[Analyst]: Hi, yes. Good afternoon, and thank you very much for taking the questions. I wanted to start on emissions. Jim, you mentioned last quarter that the new emissions rules could be a multi-billion dollar opportunity for Ford over a two-year period. Sherry, you said today about the company having opportunities to optimize on mix for next year. Is that multi-billion dollar figure still the right metric for investors? Should investors think about that as being all additive to current EBIT, or is some of this about avoiding future compliance costs that will no longer come into effect?

Your next question will come from Mark Delaney with Goldman Sachs.

Jim Farley: Thank you for your question. There are two principal drivers for investors for emissions in the U.S. to think about. The first is a different regime, if it's confirmed in December, whenever it will be, will allow us to minimize the cost of credits that we would buy. We had those as optionality, and we don't have to use them.

Uh, yes. Um, good afternoon and thank you very much for taking the questions. I wanted to start on emissions. Jim, you mentioned last quarter that the new emissions rules could be a multi-billion dollar opportunity for Ford over a 2-year period, and Sherry, you said today about the company having opportunities to optimize on mix for next year. So, is that multi-billion dollar figure still the right metric for investors, and should investors think about that as being all additive to a current event, or is some of this about avoiding future compliance costs that will no longer come into effect?

Sherry House: That's right.

Jim Farley: That's a really big advantage. The second one is the monetization of that is very much centered around mix, mix of powertrains, mix of series, mix of vehicles. Even if we have basically maxed out industrial manufacturing capacity, we still have lots of levers to sell what customers really want. We'll put a finer point on all that in the year-end when we look at next year's guidance. Anything to add, Sherry?

Sherry House: Yeah, just that we have purchase obligations about $2.5 billion, and we think a lot of that may go away with Q4. We're already 40% lower from where we started the year with the purchase obligations because the ZEV-related credits went away, and we had no obligation any longer to those contracts. That's a big part of what is being reduced.

So even if we have basically a maxed out in industrial manufacturing capacity, we still have lots of levers um to sell what customers really want and we'll put a finer point in all that for in in the year end. Uh, when we look at next year's guidance, ending the ad Sherry

Um, yeah. Just that. Um, we have purchase obligations about 2 and a half billion dollars and we think a lot of that may go away, you know, with with Q4 and we're already 40% lower uh, from where we started the year with the purchase obligations because the that related credits went away and we had no obligation any longer uh to those contracts. So that's that's a big part of what is being reduced.

[Analyst]: Thank you. My other question was about better understanding what's happening with profits in the business this year, excluding tariffs and the aluminum issue. If I walk from the midpoint of the EBIT guidance given with the July call, I add in the $1 billion lower tariff headwind and then subtract the Novelis cost, you end up right at the midpoint of your new EBIT guidance for 2025. It doesn't appear on the surface that the Q3 strength is continuing into Q4, and maybe there's some timing that's happening in Q3 and goes away. Maybe that's the wrong interpretation, and really, you're talking more to the high end of the outlook for the year. Any more color you can share around how to think about profit trends in the core business would be helpful. Thanks.

Thank you. Uh, my other question was about better understanding what's happening in with profits in the business. Uh, this year, excluding tariffs and the aluminum issue. If I, if I walk from the midpoint of the evict guidance, given with the July call, I had in the the billion dollar um lower tariff headwind and then subtract the novellas cost, you end up right at the midpoint of your new evict guidance for 2025. So it it doesn't appear on the surface that the 3Q strength is continuing into 4q and maybe there's some timing uh, that's happening in 3 q and and and goes away. Um but but but maybe that's the wrong interpretation and and and really you're talking more to the high end of uh the outlook for the year. So any any more color you can share around, how to

Sherry House: Yeah, let me just start by saying our business has been performing exceptionally well. As a result, we would have guided $8 billion plus. With that, you take out the Novelis EBIT impact of $1.5 to $2 billion, and that's how you get to the $6 and the $6.5 billion. If you would have taken our prior guidance of $6.5 to $7.5 and took out the $1.5 to $2, we would have been guiding at $5 to $5.5. Indeed, we do have progress in the business. It is partially because of the improvements in the tariffs, and that's going to be $1 billion. Before we even got to that, we've had material cost improvements, the credit business has been performing well, and pricing and volume has also been strong.

Think about profit trends in the core business; that would be helpful. Thanks.

Yes, so let me just start by saying, um, our business is performing exceptionally well, and as a result, we would have guided $8 billion plus.

[Analyst]: Thank you.

With that, you take out the novellas uh, even impact of 1 and a half to 2 billion. And that's how you get to the 6 and a 6 and a half billion. If you would have taken our prior guidance of 6 and a half to 7 and a half, and took out the 1 and a half to 2, we would have been guiding it 5 to 5 and a half. So, indeed, we do have progressed in the business. It is partially because of the improvements in the tariffs, um, and that's going to be a billion dollars. But before we even got to that we've had material cost improvements. The credit business is number of Performing well and pricing and volume is also been strong.

Operator: Our next question will come from Doug Carson with Bank of America. Doug, your line is open. Feel free to unmute. We can go to our next question, and we'll return to Doug. For our next question, we'll go to Edison Yu with Deutsche Bank Research.

Our next question will come from Doug Carson with BFA.

Be your line is open. Feel free to unmute.

Uh, we can go to our next question, and we'll return to Doug.

For our next question, we'll go to Edison U with Deutsche Bank Research.

[Analyst]: Hey, can you hear me?

Operator: We can. Please go ahead.

Hey, can you hear me?

[Analyst]: OK, thanks.

Jim Farley: Yes, yes.

[Analyst]: Thanks for taking the question. First, I think you mentioned that looking at next year, the tariff impact should be similar. Can you just walk us through some of the assumptions around that? I would have thought some of maybe the changes in policy could help.

We can please go ahead. Thanks. Yes.

Thanks for taking question. First off, I think you mentioned that, looking at next year, the, the Tariff impact should should be similar, um, can you just walk us through some of the assumptions around that? I, I would have thought some of maybe the the changes in policy could could help.

Sherry House: Yeah, the changes in policy, the proclamation that happened last Friday, gave us $1 billion of benefits. That's now allowing us to offset more of our parts tariff expense. That's going to be the primary improvement that we saw that was driving the $1 billion that I just talked about, leading to just a $1 billion net impact for this year and enabling us to have a similar impact on tariffs and costs for next year. Basically, what's going to be left is you're going to be left with auto parts tariffs that don't have offsets, steel and aluminum in particular. That's going to be both the tariffs of steel and aluminum, as well as any of the pricing impacts that come through, and then any of the vehicle import tariffs that are not offset by the U.S. content offset that we're allowed.

Jim Farley: The time frame is different. This year was a partial year. Next year is a full year.

Yeah, so the um the changes in policy, the proclamation that happened last Friday. Gave us a billion dollars of benefits and that's now allowing us to offset more of our parts tariff systems. So that's going to be the primary Improvement that we saw that was driving the billion dollars that I just talked about leading to just a 1 billion dollar net impact for this year and enabling us to have a similar impact on tariffs and costs for next year. Uh so basically, you know what's going to be left is you're going to be left with the um, with Auto Parts, uh, tariffs that that don't have, you know, offset steel, and aluminum, um, in particular. And that's going to be both the tariffs of Steel and aluminum is well, as any of the pricing impacts that come through. And then any of the vehicle import tariffs that are not offset by the US content, uh, offset that we're allowed.

Sherry House: That's right. When you look at the impacts, we're expecting it to be very similar for this year.

And the time frame is different. Uh, this year was partially, or next year is a full year.

[Analyst]: Understood. Thanks for the detail. Just a follow-up on, I think, some of the comments you made about Ford Model e investment. I guess, how are we thinking about the Skunk Works efforts now? Obviously, you talked a lot about the emissions being a huge potential tailwind. Obviously, you spent all this effort on the next-gen EV platform. Are there just high-level other kind of changes we're thinking about related to that? How does one kind of move forward?

That's right, but when you look at the impacts, we're expecting it to be very similar this year.

Understood. I said, thank you the, the detail and then just just a follow-up on. Um, I think some of the comments you made about about Model E investment,

I, I guess how are we thinking about, you know, the Skunk Works efforts now, um, obviously you talked a lot about, you know, the missions being huge, you know, potential Tailwind. Um, but you know, obviously there's you spent all this effort on the next gen EV platform. Um,

Hi. How does how does 1 kind of move forward?

Jim Farley: Great question. You know the EV North America market we're seeing now in the fourth quarter of this year, I believe will be, we believe will be very different in 2027 through 2035 when that vehicle is out in the market. Two things to think about. First of all, the UAV was designed for two priorities: the lowest possible cost platform with multiple top hats in one facility, and designed to really compete in the heart of what we believe is the new EV market in North America, which is affordable commuter vehicles. We expect adoption will increase over time, and the market will continue to evolve, and maybe even regulations evolve. We think this product is literally at the center of the future of the EV market in the U.S.

Great question.

Yeah, the EV North America Market, we're seeing now in the fourth, fourth quarter of this year, I believe will be, We Believe will be very different in 27 to 35, you know, when that vehicle is out in the market. Um, and, and so, 2 things to think about, first of all, the UAV was designed for 2 priority, the lowest possible cost platform with multiple top hats in 1, facial,

And designed to really compete in the heart of what we believe is the new EV market in North America, which is affordable commuter vehicles. We expect adoption will increase over time.

And the market continued to evolve, and maybe even the regulations evolve. We think this product is literally at the center of the future of the EV market in the U.S.

[Analyst]: Thank you.

Thank you.

Operator: Our next question will come from Ryan Brinkman with JPMorgan.

[Analyst]: Hi, thanks for taking my question. Regarding Novelis' impact, you know clearly there's some shifting here of production and wholesales impacting the cadence of earnings and cash flows that matters to investors. Maybe with regard, though, to the impact on retail sales and the customer, what are you expecting there? It looks like at the end of September, you were fortunately sitting on an 88-day supply of F-Series, more than GM at 70 days. Full-size pickup segment average, I think, is 78 days. Of course, we operated with far less during the chip shortage. How are you thinking about that impact or about managing that impact from a customer perspective?

Our next question will come from Ryan Brinkman with JP Morgan?

Hi, thanks for taking my question. Um, regarding novellis impact, you know, clearly there's some shifting here of production and Wholesales impacting the Cadence of earnings and cash flows. That Matters to investors. Maybe with regard though to the impact on retail sales and the customer. What are you expecting there? It looks like at the end of September. You were fortunately sitting on an 88 day supply.

Of a series more than GM at 70 days, full size.

The pickup segment average, I think, is 78 days. Of course, we operated with far less during the chip shortage. So, how are you thinking about that impact, or about managing that impact, from a customer perspective?

Kumar Galhotra: Yeah, I think this is Andrew. Thanks for the question, Ryan. We believe we have enough stock to insulate us from the impact on Novelis in the fourth quarter, given where we started the quarter. That's why I wanted to make the comment on where we expect to end the quarter, you know, in the midpoint of our range, just to give you confidence in how we're managing the Novelis impact.

[Analyst]: Very helpful. Thank you.

Yeah, I think, uh, this is Andrew. Thanks for the question, Ryan. We believe we have enough stock to insulate us from the impact of novellas in the fourth quarter, given where we, uh, started the quarter. And that's why I wanted to make the comment on where we expect to end the quarter, you know, in the midpoint of our range, just to give you confidence in how we're managing the novellas' impact.

Very helpful. Thank you.

Operator: For our next question, we'll return to Doug Carson with Bank of America. You may now unmute and ask a question.

For our next question, we'll return to Doug Carson with BFA. You may now unmute and ask your question.

Jim Farley: Hey, guys, I'm not sure if you could hear me.

Operator: We can. Please go ahead.

Jim Farley: Great. Thanks so much for taking my question. Ford and Ford Credit both have very strong balance sheets. It's a true asset, certainly for bondholders and, I think, equity alike. The leverage has been very low. The cash balance is very high. In late September, Ford and Ford Credit rolled out what appeared to be a successful plan to offer a subvented financing of the F-150 to subprime customers, providing them an opportunity to enjoy a lower loan rate, kind of reserved for higher FICO scores, perhaps easing some affordability issues. Maybe you can explore what opportunities you could provide customers through creative strategies around loans and rates, given the strong balance sheet.

Hey guys, I'm not sure if you could hear me.

We can please go ahead. We can oh great. Thanks so much for for taking my question. Um

4 and Ford Credit both have very strong balance sheets. It's a, it's a true asset, certainly for Bond holders, and I think Equity alike,

Um, the leverage has been very low, the cash balance is very high, and in late September, Warden for Credit rolled out. It appeared to be a successful plan, offering subvented financing for the F-150 to subprime customers, kind of providing them an opportunity to enjoy, um, you know, a lower loan rate, kind of reserved for higher FICO scores, perhaps easing some affordability issues. So maybe you can kind of explore.

Um, you know, what opportunities you could maybe provide and, you know, customers through creative, uh, your strategies around loans and rates given the strong balance sheet.

Sherry House: Thank you for the question. We ran it the last few weeks of September, what we call a no-tier upgrade marketing program. It really was to generate news for the F-150. We haven't changed our purchasing policy or our risk appetite, but we're really focused on ensuring that we use these sort of incentives to structure deals for customers that they can afford their monthly payments on a sustainable basis. I think this program has proved to be very effective. Overall, it didn't change our average FICO scores. In fact, it went up. These are sort of opportunities that we can look at on an ongoing basis.

Thank you for the question.

And the what we call a no tier upgrade um marketing program and it really was to generate, um, news for the F-150. Um, we haven't changed our purchasing policy or or our risk appetite, but we're really focused on ensuring that we use these sort of incentives to structure deals for customers that they can afford their monthly payments. I'm sustainable basis.

So I think this program proves to be very effective overall. It didn't change how average BYGO went; I expected it went up. Um, but these are sort of opportunities that we can look at on an ongoing basis.

Jim Farley: Just so I'm clear, I believe your subprimes are a very small part of the overall budget.

Sherry House: Very small. Yeah, it's very small. In fact, our high-risk portfolio mix is just 3%, and it's been very sustainable at that 3% for quite some time now.

Just so I'm clear, I believe your subprimes are a very small part of the overall budget, very small.

yeah, it's it's very

Jim Farley: OK, I think that's comforting for people, but also maybe an opportunity to expand some loans to where subprime could potentially get more sales done. Wouldn't be a terrible thing also. I appreciate the question and the answer. I appreciate it.

Um, a portfolio mix is just 3%, and it's been very sustainable at that 3% for quite some time now.

Okay, I think that's a

That's confident for people, but also, maybe an opportunity to expand some loans to, uh,

Sherry House: Thank you. We're concentrated on helping sell more products. We're very open to new ideas.

More subprime and potentially get more sales done wouldn't be a terrible thing also. So I appreciate the question and answer. I appreciate it.

Jim Farley: You must have some dealer friends. I wish.

Yeah, thanks. We’re concentrated on helping, uh, sell more products. So, we’re very open to new ideas. We must have some dealer friends. I wish.

Operator: Our next question will come from Itay Michaeli with TD Cowen.

[Analyst]: Great, thank you. Good evening, everyone. Just wanted to go back to the powertrain and segment mix opportunity next year, maybe trim mix as well, with the compliance costs. To what extent will that optimization end up pushing up your ATPs? If so, how confident are you, given some of the affordability constraints, that you can kind of pass that mixed optimization through to the consumer?

Our next question will come from Ekai Me with TD Cowen.

Uh, great. Thank you. Good evening, everyone.

Just wanted to um go back to the um the the powertrain and segment next opportunity next year, maybe trim mix as well with the compliance costs. To what extent would that optimization end up pushing up your your atp's and and if so how confident are you giving some of the affordability constraints uh that you can kind of pass uh that that mix optimization through to the consumer?

Kumar Galhotra: It's Andrew. Thank you for the question. Our ATPs are really strong right now, as you know, and we are among the leaders and above segment average. I think at the core of what it allows us to do is build the customer demand and give us the flexibility to manage our mix, as Jim mentioned earlier, on certain vehicles, especially as we look at some of our off-road derivatives like Tremor and Raptor. It gives us some headroom in that to actually manage the mix within selected vehicles.

[Analyst]: Terrific. That's helpful. As a quick follow-up, maybe on the quarter, if you could talk through the drivers behind Blue's improved pricing. I think $400 million was better than what you did last quarter, as well as any additional color on fleet pricing in the quarter. Thank you.

Uh, it's Andrew. Uh, thank you for the question. Um, well, our ATPs are really strong right now, as you know. And, you know, we are among the leaders and above 7 segments, average. But I think the, at the core of what it allows us to do is build the customer demand. Um, and give us the flexibility to manage our mix, as Jim mentioned earlier, on certain vehicles, especially as we look at some of our off-road derivatives like Tremor and Raptor. It gives us some headroom in that to actually manage the mix within selected vehicles.

Terrific. That's helpful as a quick follow-up, maybe on the quarter. If you could talk through the drivers behind Blue's improved pricing, I think $400 million was better than what we did last quarter, as well as any additional color on fleet pricing in the quarter. Thank you.

Kumar Galhotra: I think in general, as I mentioned earlier, the industry pricing is up 0.5%. Retail is up more. It's very strong right now, up 1.7%. It's driven by a lot of the tariff pricing through the year. If you look at the counterbalance, that fleet has been down a bit. It's primarily in the van business. Fortunately for us in our portfolio and what plays to our strength, our Super Duty pricing and full-size pickup has remained very strong for us throughout the entire year.

Jim Farley: One of the great offsets that we've been able to manage this year with Ford Pro is not relying on the traditional fleet business. Andrew, maybe you want to talk about the changing mix of our Pro business.

Kumar Galhotra: Yes, we've continued to increase our overall services as a % of EBIT. Just a couple of years ago, we were around 13%, and we are now well on our way to hit our 20% total EBIT. Across the channels, we've also been able to diversify. We're roughly a third of our channel mix now amongst large corporations, a third with small, medium businesses, and a third with government and daily rentals. We are very well balanced, very diversified, both on the vehicle side and also with the services.

Well, I think in general, as I mentioned earlier, the, um, industry pricing is up a half a point. Uh, retail is up more. It is, it's very strong right now. Up 1.7 points, it's driven by a lot of the Tariff pricing through the year. Um, if you look at the, the counterbalance of that fleet has been down a bit. It's primarily in the van business and, and fortunately for us in our portfolio and where what place do our strength, our Superduty pricing and full-size pickup has remained very strong for us um throughout the entire year and 1 of the great offsets that we've been able to manage this year. With Ford Pro is not relying on the traditional Fleet business. Uh Andrew maybe you want to talk about the changing mix of our Pro business. Yes we've um continued to increase our overall Services as a percent of ebit. Um just a couple years ago we were around 13% and we are now well on our way to hit our 20% total uh ebit across the channels. We've also been able to diversify, we're roughly a third.

Jim Farley: That strength in small, medium business, SMB, we call it, is really a key accomplishment by the team. We heavily focus on that group. We're continuing to try to grow that mix of that group, and that helps us a lot de-risk any kind of pricing risk on the fleet.

Um, of our Channel mix. Now amongst large corporations, a third with small medium businesses and a third, uh, with government and daily rentals. So we are very well balanced, very Diversified both on the vehicle side and also with the, uh, sale services. But our our strengths that strength in small medium business, SMB, we call it is really a key key accomplishment by the team. We heavily focus on that. Uh, that group.

Kumar Galhotra: Yes.

Jim Farley: Terrific. That's always been able to grow.

We're continuing to try to grow that mix of that group. Um, and that helps us a lot. Um, de-risk any kind of pricing risk on the fleet. Yes.

and we've been able to grow,

Operator: Your next question will come from Tom Narayan with RBC Capital Markets.

Tom narion with

[Analyst]: Thanks for taking my question. Just one quick clarification. The net impact on tariffs on 2025 is $1 billion and the 2026 to be similar. Do you mean to say that the 2026 net tariff, assuming everything we know now, is also $1 billion?

with RBC Capital markets.

Uh, thanks for taking my question. Just one quick clarification. Um, so the net impact on tariffs on 20...

By $1 billion and the $26 to be similar. Do you mean to say that the $26 net tariff? Assuming everything we know now is also $1 billion.

Sherry House: Yeah, let me clarify. For Q4 of this year, we expect an EBIT impact of $1.5 to $2 billion due to Novelis. Due to tariffs, we're expecting to see a positive in Q4 because we are going to get the receivable for the $1 billion. That's going to be a positive in Q4. I wasn't sure if you were originally talking about the Novelis because the numbers were negative.

Yeah, let me, yeah, let me clarify. So, for Q4 of this year, we expect an even impact of 1 and a half to 2 billion dollars due to um, novalis than due to tariffs. We're expecting to see a positive, um, in the Q4 because we are going to get the receivable for the billion dollars. So that's, that's going to be a positive in Q4.

[Analyst]: No, the tariffs. Because I remember in Q2, it was like negative $800 million, Q3 negative $700 million. It's like a plus $500 million for Q4 to get to that $1 billion. I'm just understanding how to think about 2026.

Sherry House: What is going to happen is you would have tariff costs, and it'll be offset by this $1 billion that is retroactive that's coming in in Q4. To date, we're at like $1.7 billion, and then you'll be able to take the $1 billion off. You'll encounter a little bit more next quarter, but you'll be positive for Q4.

I wasn't sure if you were originally talking about the Novelis, because the numbers—no, no, no—the tariffs. So, because I remember in Q2, it was like negative $800 million; Q3, negative $700 million, so it's like a plus $500 million for Q4 to get to that $1 billion. I'm just understanding how to think about 2026. What's gonna happen is you would have pair of costs and it'll be offset by this.

[Analyst]: Got it. Thank you. A quick follow-up. As you pivot, let's say, from EV to ICE, just understanding how that works. Clearly, there's stranded costs. We saw the EV losses worsen sequentially. I know some of that was investment. How should we think about EV losses going forward, like to next year, you know, if volumes come down? I know some of the plants are flexible. Some of them are dedicated. How should we think about that?

In Q4, so today we're at like $1.7 billion, and then you'll be able to take the billion off. You'll encounter a little bit more next quarter, but you'll be positive for 2024.

Got it, got it. Thank you. And a quick follow-up. Um, as you pivot, let's say from, you know, EVs to ICE, just understanding how that works. Clearly, there's, you know, stranded costs. We saw the EV losses worsen sequentially. I know some of that was investment, but...

Jim Farley: We'll be excited to give you an update after the fourth quarter as we look into next year.

Losses going forward, like next year, you know, as if volumes come down. I know some of the plants are flexible; some of them are dedicated. But how should we think about that?

[Analyst]: Got it. Thanks.

We'll be excited to give you an update, uh, after the fourth quarter as we look at the next year.

Got it, thanks.

Sherry House: Your next question.

Very much a decision for the company.

Jim Farley: Very good decision for the company.

Operator: Your next question will come from Emmanuel Rosner with Wolfe Research.

Your next question will come from Emmanuel Rosner with Wolfe Research.

Kumar Galhotra: Oh, great. Thank you so much. I wanted to ask you just a little bit more how to think about the mix optimization opportunity into next year as a result of some of these lower compliance hurdles. I think you mentioned the ability to maybe maximize some of the off-road offering, Raptor, et cetera. Is there a sense that those were supply constrained, like you were constrained in the supply of those, and that there's a large amount of unmet demand in there? Like any sort of way to frame this in terms of how you had been managing the business before as a result of these compliance rules? Essentially, what is the size of the opportunity here? Emmanuel, it's Andrew again.

Oh great. Uh thank you so much. Uh 1 to ask you just a little bit more um how to uh think about the mix optimization opportunity into next year as a result of some of these uh uh lower? Um, you know compliance hurdles? I think you mentioned the ability to maybe maximize some of the off-road offering Raptor Etc. Um, it it is there a sense that um, you know, those where Supply constraints like you were constraining the supply of those and that there's a large amount of like unmet demand in there like any any sort of uh, way to frame this in terms of how you had been managing the business before, as a result of these uh, you know, compliance rules and and you know what, essentially what is the size of the opportunity here?

Kumar Galhotra: Yes, so when you're compliance constrained or under certain regulatory policy, we were having to restrain some of the mix because some of the off-road vehicles, like I mentioned before, Tremor and Raptor, are actually very negative against compliance. We would suppress some of the natural demand within that. As we look at next year and our overall build mix, we'll obviously match that to customer demand. We don't want to overproduce against that so we can remain disciplined. We'll take a look vehicle by vehicle, like we always do, to maximize our mix within.

Jim Farley: One of the big opportunities to complement what Andrew said on the series mix nameplate is the hybrid mix. Obviously, we can change the pricing in hybrid and change the demand curve for the vehicle. We've had to be very aggressive with hybrid pricing to make sure we cover the right mix. That obviously is a big opportunity for us because the F-150 is a huge volume vehicle for us, and the hybrid F-150 is so popular. We have opportunity there to maximize the company's results.

Well, um, and then you all it's Andrew again. Yes. So in in, when your compliance constrained or under certain regulatory policy, uh, we were having to restrain some of the mix because some of the off-road vehicles like I mentioned before, Tremor and Raptor are actually very negative against compliance. So we would suppress some of the natural demand uh, within that. So, as we look at next year and our overall building next, uh, we'll obviously match that to customer demand, uh, we don't want to overproduce against that. Um, so we can remain disciplined, um, and we'll take a look vehicle by vehicle. Like we always do to maximize our mix within 1 of the big opportunities. Uh, to complement, what Andrew said, on the series mix, uh, name plate is the hybrid mix.

Sherry House: The only other thing that I would add, and I just want to make sure everybody understands, is that with the EPA changes that are likely, that is removing a compliance headwind that would have been going into next year. It is just really important that everyone understands that we were facing a headwind, and that is going to help to eliminate a year-over-year impact.

And obviously, we can change the pricing and hybrid and change the demand curve for for the vehicle. Uh, we've had to be very aggressive with hybrid pricing to make sure we cover the Right Mix. And that obviously, is is a big opportunity for us because F-150 is a huge volume vehicle for us in the hybrid. F-150 is so popular. Um, we have opportunity there to to maximize the company's results.

Usually, the thing that I would add, I just want to make sure everybody understands is that, um, with the EPA changes that are likely, um, that is removing a compliance headwind that would have been going into next year. And so, it's just really important that everyone understands that we were facing a headwind. And so that's going to help to eliminate a year-over-year impact.

Kumar Galhotra: Great. Just one additional question on guidance, comparing it to the most recent one that you had provided last quarter. If I basically take the current guidance adjusted for the Novelis fire, but also the $1 billion benefit from lower tariff outlook, it seems like it's essentially an unchanged guidance versus last quarter. That's despite essentially assuming now, I guess, expecting now for the industry better SAR as well as better pricing. Are there at the same time some industry or company factors that are playing out maybe a little bit less favorably than three months ago?

Great. And then, um, just one additional question on guidance. Um, comparing it to just the most recent one that, um, you know, you had provided last quarter. So if I basically take, you know the uh,

The current guidance adjusted for the uh novellas fires, but also the uh the billion dollar benefit from uh, lower tariff Outlook. It seems like it's essentially an unchanged guidance versus, you know, last quarter. Um, and that's, uh, despite essentially assuming now, I guess expecting now for the industry better SAR as well as uh, better pricing. So uh, there at the same time, um, some industry or company factors that are playing out, maybe a little bit less favorably than 3 months ago.

Sherry House: No, none to know. I mean, it's as I said, we were going to be $8 billion plus. When you take that $1.5 to $2 billion off, that gets you to the $6 to $6.5 billion. You add the $1 billion to tariffs. We also are performing at the higher end of the guidance that we had put out there at the beginning of the year. The reason for that is credit's been doing good. Material costs have been doing good. The pricing and volume have been solid. That's why we were at the higher end of the guidance.

No, none to know. I mean it's as I said I mean we were a B8 billion plus when you take that 1 and a half to 2 billion off to get you to the 6 to 6 and a half, you add the billion dollars of tariffs. Um but we also our performing at the higher end of the guidance that we had put out there at the beginning of the year and the reason for that is credit's been doing good hero costs have been doing good. Um, the pricing and volume have been solid and so that's why we were at the higher end of the guidance.

Kumar Galhotra: OK, I'll take it offline on the South Side call. I appreciate all the color.

Okay, yeah, I'll I'll, uh, I'll take it offline on the uh, on on the Southside call. But uh, I appreciate all the caller.

Operator: Our final question will come from Colin Langan with Wells Fargo.

Final question will come from Colin Langan with Wells Fargo.

[Analyst]: Oh, great. Thanks for taking my question. I just wanted to follow up. I'm actually, I guess I'm getting a little confused with some of the puts and takes. If I look at the midpoint of guidance Q4, it's like $550 million. I thought you just said that tariffs would be a refund of $1 billion. The Novelis, so it just would imply almost like break negative if it wasn't for the tariff refund. Even if I add Novelis, then it would still imply a pretty big drop underlying from Q3 at $6 to Q4. Am I misunderstanding the commentary there?

I thought you just said that tariffs would be a refund of $1 billion.

and then the novella, so it just would imply almost like

Negative. If it wasn't for the tariff refund, um, and then it just, even if I add Nollas, then I would still imply a pretty...

Big drop underlying, uh, from Q3 at 26 to Q4.

Am I misunderstanding the commentary there?

Sherry House: We would have been at $8 billion plus. You take out the Novelis impact in Q4, so that's going to be $1.5 to $2 billion, which gets you to the $6 to $6.5 billion for 2025. Now, when I talk about makeup, that's in 2026. That's where you get the billion dollars back in EBIT, not 2025.

We would have been at 8 billion plus.

You take out the novella impacting Q4, so that's going to be $1.5 to $2 billion.

Which gets you to the 6 to 6.5 for 2025. Now, when I talk about makeup that's in 2026.

So that's where you get the billion dollars back in EBIT.

Not 25.

[Analyst]: I'm just on the prior question. Year to date, you have, like, what was it, $1.7 billion of tariff costs. The guide for the year is $1 billion. How are we getting there for Q4? I thought that was the refund, or maybe I misunderstood that. Sorry.

Sherry House: Yeah, that's right. As of last Friday, when the proclamation was signed, we now can apply a greater % of the MSRP tariff offset to our parts. Now that we can do that as of last Friday, we're going to get $1 billion of benefit. We couldn't record that in the Q3 numbers because our books were already closed, and this just happened last Friday. You're going to see a receivable in Q4 that's more than going to offset what the tariff costs would be in Q4. When you add Q1, Q2, Q3, Q4 together with that positive receivable, you'll reach $1 billion net for the full year.

So so I guess I'm just on the prior question. So year to date. You have like what was it 1.7 billion of tariff costs that guide for the year is a billion. What should, how are we getting there for Q4, is that I thought that was the refund or maybe I misunderstood that. Sorry.

Yeah, that's right. So, as of last Friday, when the proclamation was signed,

We now can apply a greater percentage of the MSRP.

Tariff, um, offset to our parts.

And now that we can do that, as of last Friday, we're going to get a billion dollars of benefit. We couldn't record that in the Q3 numbers because our books were already closed, and this just happened last Friday. So now you're going to see a receivable in Q4. That's more than going to offset the tariff costs that would be in Q4. Then, when you add Q1, Q2, Q3, and Q4 together with that positive receivable, you'll reach $1 billion net for the full year.

[Analyst]: OK, got it. Just, I guess, follow up on your color on 2026. You highlighted costs as $1 billion positive. Novelis would be $1 billion help into next year. Any color? I think in the past, you've talked about around $600 million of sort of the regulatory costs just structurally going away as a tailwind. Did I catch the commentary on inventory? It'll be actually down again next year. We should kind of have a little bit of a destocking factor that we should be thinking about too?

Okay.

Um,

And then just to follow up on your caller on 2026, you highlighted costs of $1 billion positive novelties. It would be a billion help until next year. Any color, I think? In the past, you've talked about around $600 million of sort of the regulatory costs just structurally going away as a tailwind. And did I catch the commentary that inventory will actually be down again next year? So, we should kind of have a little bit of desktop factor that we should be thinking about too.

Sherry House: Colin, there's a lot of texture we want to take you through as we position 2026 and beyond. We're going to do that properly at Q4 earnings. For now, I just said, you know, we've got some tailwinds and headwinds that I wanted you to know. Tariffs are roughly the same. Tailwinds make up Novelis, likely removal of the EPA compliance headwind, and continued cost savings. The headwinds are going to be investments in our launches in Marshall, Michigan and Louisville, and investments in the cycle plan. That's what we're able to share at this time. We look forward to sharing more with you in our Q4 earnings.

[Analyst]: OK, all right. Thanks for taking my question.

Well, um, it kind of—there's a lot of texture we want to take you through as we position 2026 and beyond, and we're going to do that properly at Q4 earnings. And so for now, I just said, you know, we've got some tailwinds and headwinds that I wanted you to know. Tariffs are roughly the same tailwind; the makeup, Novellis, likely removal of the EPA compliance headwind. You know, continued cost savings, but then the headwinds are going to be investments in our launches in Marshall and Louisville, and investments in the cycle plan. So that's, um, what we're able to share at this time, and we look forward to sharing more with you in our Q4 earnings.

Okay. All right. Thanks for taking my question.

Operator: That was your final question. I'll now take the call.

Jim Farley: I just want to say one thing. We appreciate all of our investors and the people that analyze our industry very carefully. I just want to note that I know Adam Jonas is moving on to another segment. I wanted to thank you for your activist investor point of view. You certainly helped us be better managers and stewards of the company. I think we just wanted to say thank you as a management team for all of you for what you do. When someone moves on, like Adam, we want to highlight that. Thank you. Thank you, operator, again. To summarize, Ford is addressing the key issues affecting our industry head-on. Our improved industrial system is driving consistent results on cost and quality. Ford Pro is making Total Ford a more durable company and business.

That was your final question. How much I just want to say.

I just want to say 1 thing. Um, we appreciate all of our investors and the people that analyze our industry very carefully. And I just want to note that, I know Adam Jonas is moving on to another segment and I wanted to thank you for your for your activist investor point of view and certainly helped us be better managers and stewards of the company. And uh, I think we just wanted to say thank you as a management team for all of all of you for what you do. But it uh when someone moves on like Adam we want to highlight that thanks.

Okay, uh, well, thank you, operator, again. Um, to summarize, what is addressing the key issues affecting our industry head-on?

Our improved industrial system is driving consistent results in cost and quality.

Jim Farley: We have and will continue to take decisive actions to improve and grow our company. I'm confident in a stronger Ford as we head into an exciting 2026. Thank you today.

Ford Pro is making total Ford a more durable company and business.

We have, and will continue to, take decisive actions to improve and grow our company.

And I'm confident in a stronger Ford as we head into an exciting 2026. Thank you today.

Operator: This concludes the Ford Motor Company Third Quarter 2025 earnings call. Thank you for your participation. You may now disconnect.

This concludes the