Ford Motor Q4 2025 Ford Motor Co Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Ford Motor Co Earnings Call
Lynn Tyson: CEO of Ford Credit. Jim will give a high-level overview of the business, and Sherry will provide added texture on the financials and our guidance for 2026. 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. You can find the deck at shareholder.ford.com. Our discussion also includes forward-looking statements. Our actual results may differ. The most significant risk factors are included on page 21 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 Sherry House at the Wolfe Research Auto, AutoTech, and Semiconductor Conference in New York City tomorrow, 11 February. Now I'll turn the call over to Jim.
For credit, someone give a high level overview of the business and share. It will provide added texture on the financials and our guidance for 2026 will be referencing non-gaap measures. Today, these are our reconciled to the most comparable us gaap measures in the appendix of our earnings deck. You can find the deck at shareholder.com. Our discussion also includes overlooking statements or actual results. May differ. The most significant risk factors are included on page, 21 of Our Deck. Unless otherwise noted all comparisons are year-over-year company. Ebits Epps and free cash flow are on an adjusted basis.
Jim Farley: Thank you, Lynn. Thank you to the Ford team, to all of our dealers, to our suppliers, and all of our partners. We executed very well last year. We managed through numerous challenges that came our way, from multiple tariffs to supply chain disruptions, and delivered good results in all areas within our control at Ford. We continued to grow $187 billion of revenue. We also lowered material and warranty costs and made significant progress in quality. Our US market share climbed to 13.2%, our best performance in six years. I'm pleased to say we delivered TSR of 42%. On the bottom line, we generated $6.8 billion of adjusted EBIT for the full year. This includes $2 billion headwind for Novelis's fires and a net tariff impact of $2 billion.
Upcoming IR engagements include Sherry house. At the world's research Auto auto tech and semiconductor conference in New York City tomorrow February 11th. Now, I'll turn the call over to Jen.
Thank you, Lynn.
Thank you to the 14.
All of our dealers who are suppliers, and all of our partners.
We execute our last year, we managed to numerous challenges that came our way.
For multiple tariffs to supply chain, disruptions and deliver good results. In all the areas within our control of Ford.
We continue to grow 187 billion dollars of Revenue.
We also lowered material and warranty costs and made significant progress on quality.
Our U.S. market share climbed to 13.2%—our best performance in six years.
I'm pleased to say we delivered TSR of 42%.
On the bottom line, we generated $6.8 billion of adjusted EBIT for the full year.
This includes 2 billion headwind for nollas fires.
Jim Farley: That's a $1 billion higher tariff impact than we communicated just in October, due to the unexpected and late year change in tariff credits for auto parts. Without that, a full year EBIT on that one-timer, without that one-timer, would have been $7.7 billion in EBIT. The takeaway from my perspective is we closed last year a much stronger business, with a solid foundation to achieve our target of 8% adjusted EBIT target by 2029. Let's talk about that foundation. We dealt decisively with the reality of the market and shifted our focus of our EV business to a high volume, affordable end of the market. You'll hear more in a second. We made big strides in cost and quality, and yes, that means we recalled many of our old vehicles to take care of our customers.
And the net tariff impact of 2 billion.
That's a 1 billion, higher tariff impact, and we communicated just in October due to the unexpected and late year change in tariff credits for auto parts.
Without that a 4 year, ebit on that 1 timer without that 1. Timer would have been 7.7 billion dollars to leave it.
The takeaway from my perspective is you closed last year a much stronger business with a solid foundation. To achieve our Target of 8% adjusted ebit Target by 2029
Let's talk about that Foundation.
We deal decisively with the reality of the market and shifted, our focus of our EV business to a high volume affordable.
End of the market to hear more in a second.
We made big strides in cost and quality and yes. That means we recalled many of our old vehicles.
Jim Farley: We quietly, but very thoughtfully, modernized the company, upgrading our talent, all of our IT tools and enterprise tools, the culture of the company, and the facilities to unleash the performance and efficiency of our team. We're now locked in a more vibrant and profitable product and technology roadmap. No boring products is what we like to say, and boy, we can't wait for you to see our next generation. We have another wave of sophisticated and passionate vehicles for work, adventure, fun, and off-road, with a tech suite that will change the experience of owning a Ford and drive our EV business. Bottom line, the earnings power of our business is accelerating, and our Ford Plus strategy distinguishes us from the competition in clear ways. First is the revenue power of Ford Pro. It's a durable commercial business our competitors cannot match.
To take care of our customers, we quietly and very thoughtfully modernize the company.
Upgrading our talent.
All of our it tools and Enterprise tools.
The culture of the company.
And the facilities too, only the performance and efficiency of our team.
We've looked.
We're now locked in a more vibrant and profitable product and Technology roadmap.
‘No boring products’ is what we like to say.
And boy, we can't wait to see wait for you to see our next Generation. We have another wave of sophisticated and passionate vehicles for work.
Adventure.
Fun and off-road with the tech Suite that will change the experience of owning a Ford and drive, our is business.
Bottom line, the earnings power of our business is accelerating, and our Ford+ strategy distinguishes us from the competition in clear ways.
Jim Farley: Global demand for Super Duty and Transit franchise is extremely healthy. In the US, Ford Pro's Class 1 through 7 market share is over 42%, roughly the size of our two largest competitors combined. In Europe, we're the number one commercial brand for the 11th straight year. But crucially, we're diversifying that revenue. Software and physical services grew 10% and now contributes 19% for Ford Pro's EBIT, rapidly approaching our 20% target. And we continue to deepen our competitive mode. Thanks to our dealers, who are specializing in investing in more and forming new partnerships like ServiceTitan, to broaden our reach and integrate directly with the trades. Second is our strength of our diverse truck and off-road lineup in Ford Blue.
First is the revenue Power Ford Pro. It's a durable Commercial Business. Our competitors cannot match, Global demand for Superduty and Transit, franchise is extremely healthy.
In the U.S., Ford Pro's Class 1-2-7 market share is over 42%.
Roughly the size of our 2, largest competitors combined.
In Europe, with the number one commercial brand for the 11th straight year.
But crucially, we're diversifying that Revenue.
Software and physical services to 10% and now contributes. 19% for Ford's Pros. Ebit rapidly approaching our 20% tariff Target.
And we continue to deepen our competitive mode. Thanks to our dealers, who are specializing in investing, in more informing, new partnerships like ServiceTitan, to broaden our reach and integrate directly with the trades.
Jim Farley: We have a powerful position in pickup trucks, from the affordable Maverick all the way through the F-Series, including globally, the Ranger. And Ford just won the North America Truck of the Year for the sixth year in a row, an unprecedented industry feat. We also have the highest share of revenue in the US pickup market, growing almost two full share points of revenue last year. Furthermore, we are translating our off-road dominance directly into the profitability of the company. Raptor, and importantly, our off-road performance trims now account for more than 20% of the US sales mix. This gives us massive earning power, and with pending EPA changes, puts us in a strong position to satisfy those unfulfilled demands in the market. You see this all coming to life in improving customer loyalty and advocacy, as evidenced by our higher Net Promoter Scores.
Second is our strength of our diverse truck and off-road lineup in Ford Blues.
We have a powerful position in pickups and trucks.
Including globally the range here. And for just 1 the North America truck of the year for the 60 year in a row and unprecedented industry fee.
We also have high share revenue, the US pick up.
Growing almost 2 full share points of revenue last year. Furthermore, we are translating our off-road dominance directly into the profitability of the company.
Raptor and, importantly, our off-road performance trims now account for more than 20% of the U.S. sales mix. This gives us massive earning power, and with pending EPA changes, puts us in a strong position to satisfy those unfulfilled demands in the market.
Jim Farley: Our corporate reputation is also getting stronger, important to dealing with policymakers, our partners, and of course, our communities. In fact, TIME magazine named Ford the most iconic company in America based on its very large survey base of its readers. We also expect to achieve the seventh straight year as America's number one auto producer, and we produce more than 5 vehicles in America for every 1 that we import. This year, we anticipate a more stable policy environment for our partnership with the administration this year, especially given a reset in the emission standards. We also expect year-over-year profit improvements, driven by richer Ford Blue mix, Ford Pro growth, and reduced Model E losses. We are also targeting another $1 billion in industrial cost improvements.
Do you see this all coming to life in improving customer loyalty and advocacy, as evidenced by even higher Net Promoter Scores? Our corporate reputation is also getting stronger, which is important to dealing with policymakers and our partners—and, of course, our communities. In fact, Time magazine named Ford the most iconic company in America, based on its very large, serious base of its readers.
We also suspect to achieve the seventh straight year as America's number one auto producer. And we produce more than five vehicles in America for every one that we import.
This year, we anticipate a more stable policy environment.
for our partnership with the administration this year, especially given
a reset in the emission standards.
We also set year-over-year, profit improvements driven by Richard for bluemix.
for progrowth,
And reduced Model? E losses.
Jim Farley: To drive strong execution, the management's compensation is directly tied to hitting key milestones for cost, quality, and software for the vehicles that will come out in the next few years. Our Ford Plus plan is now focused, is not just focused on near-term, short-term profitability. Let me be specific about some of the most important drivers for our long-term value creation. First, affordable EVs. We aren't just building compliance vehicles at Ford. We're launching a cost-efficient, universal EV platform that will drive profitable growth in the lower price segments, where the EVs have continued to thrive in America. We will launch multiple vehicles off that same platform, starting with the mid-size pickup, bringing younger and more diverse customers into our brand. The universal platform also gives us a scalable hedge against a potential regulation snapback in the future. Second is Ford Energy.
We also targeting another 1 billion dollars of industrial cost improvements.
And to drive strong execution. Management's compensation is directly tied to hitting key milestones for cost, quality, and software for the vehicles that will come out in the next few years.
Our Ford plus plan is now focused. It is not just focused on near-term short-term profitability.
Let me be specific about some of the most important drivers for our long-term value creation.
First affordable EVS.
We aren't just building compliance vehicles at Ford. We're launching a cost-efficient, universal EV platform that will drive profitable growth in the lower price segments, where EVs have continued to thrive in America.
We will launch multiple vehicles that same platform.
Starting with the midsize pickup.
Bringing younger and more diverse customers into our brand, the universal platform also gives us a scalable hedge against a potential regulation Snapback in the future.
Jim Farley: This is very strategic business. Our startup is a short payback period that uses our manufacturing muscle and cost advantage with our LFP batteries to diversify our revenue and de-risk the core automotive business. Third, we're controlling the electrical architecture at Ford. By bringing this in-house, we lower cost, cut our supply chain risk, and build the brain needed to enhance the user experience to differentiate and expand our integrated services profit pool. Fourth, smart partnerships. We continue to build on our partnership platform. We're looking for ways to help us move faster, to get access to IP that will eventually become commoditized, and to lower our capital expenditures and improve our scale. Our recent agreements with CATL and Renault are different but good examples. And finally, our product roadmap.
Second is Ford energy.
This is very strategic business or startup with a short payback period that uses our manufacturing muscle and cost Advantage with our LP batteries to diversify our revenue and de-risk, the core Automotive business
Third, we're calling the electrical architecture at Ford, by bringing this in-house. We lower Cost Cutter supply, chain risk, and build the brain needed to enhance the user experience differentiate and expand our integrated Services profit pool.
For.
Smart partnerships. We continue to build on our partnership platform.
We're looking for ways to help us move faster to get access to IP that will eventually become commoditized.
And to lower our Capital expenditures and improve our scale.
Our recent agreements with CATL and Renault are different, but good examples.
Jim Farley: We're doubling down on our icons, making the next generation F-150 and Super Duty absolutely breakthroughs in terms of cost, technology, powertrain choice, and functional features. We're also expanding our off-road and performance lineups across our most important and popular franchises. At the same time, we also plan to expand our market coverage with more affordable trucks and SUVs. And we'll do it with a broad mix of powertrains, gas, different kinds of hybrids, and fully electric. Customers want choice. Overall, we enter this year with the right portfolio, the right strategy, and the discipline to execute. Sherry?
And finally, our product roadmap, we're doubling down on our icons making the Next Generation F-150 and Super Beauty absolutely breakthroughs in terms of cost.
Technology.
Powertrain choice and functional features.
We're also expanding our off-road and performance LS, across our most important and popular franchises.
At the same time, we also plan to expand our Market coverage with more affordable trucks and SUVs.
And we'll do it with a broad mix of powertrains: gas, different kinds of hybrids, and fully electric. Customers want choice.
Sherry House: Thank you, Jim. Looking back at 2025, our performance clearly demonstrated two things: capital discipline and improved cost performance. Our top line remains healthy. Revenue grew for the fifth consecutive year as we continue to expand our share of revenue, including nontraditional segments like hybrid trucks, while accelerating the growth of our higher margin-paid software subscription. We also stayed disciplined on inventory, cutting US gross stocks by 16% and ending the year at 56 retail days supply, the low end of our target range. We generated $3.5 billion of free cash flow and ended the year with close to $29 billion in cash and nearly $50 billion in liquidity. We continue to prioritize our balance sheet, a significant competitive advantage that provides flexibility to accelerate investments into accretive opportunities like Ford Energy and both software and physical services.
Overall, we entered this year with the right portfolio, the right strategy and the discipline to execute Terry.
Demonstrates clearly demonstrated two things: capital discipline and improved cost performance. Our topline remains healthy—revenue grew for the 15th, as we continue to expand our share of revenue, including non-traditional segments like hybrid trucks, while accelerating the growth of our higher-margin paid software subscriptions.
We also stayed disciplined on inventory. Cutting us growth Stocks by 16% in ending the year at 56 retail days. Supply the low end of our target range.
We generated 3.5 billion of free cash flow and end of the year with close to 29 billion in cash in nearly 50 billion in liquidity.
Sherry House: These are high margin, high growth opportunities grounded in disciplined capital allocation that will drive a higher returning, more resilient business model over time. We remain committed to our investment-grade rating, while also delivering top quartile shareholder returns through both share price appreciation and dividends, including the declaration of our Q1 regular dividend of $0.15 per share last week. Now, turning to segment highlights. Ford Pro once again demonstrated its importance and persistence as a key profit pillar for Ford by delivering more than $66 billion of revenue and EBIT of $6.8 billion with a double-digit margin. Pro achieved this in the face of tariffs, production losses due to Novelis, normalization in US industry pricing, and more commoditized areas like government and delivery vans, in a challenging macroeconomic and regulatory landscape in Europe, where we achieved market share growth.
We continue to prioritize our balance sheet, a significant competitive advantage, that provides flexibility to accelerate investments into a clear opportunity like Ford energy, and both software and physical services.
These are high margins, high growth opportunities, grounded disciplined, Capital allocation, that will drive a higher returning more resilient business model over time.
We remain committed to our investment-grade rating.
while also delivering top quartile shareholder returns through both share price appreciation and dividends.
Including the Declaration of our first quarter, regular dividend of 15 cents per share last week.
Now, turning to segment highlights.
Ford Pro once again demonstrated its importance and persistence as a key profit pillar, by delivering more than $66 billion of revenue and EBIT of $6.8 billion, with a double-digit margin.
Sherry House: In the US, Transit hit record sales, up 6%, and Super Duty had its best sales in over 20 years, up 10%. Pro continues to evolve its business by diversifying revenue streams and building out its high-margin service infrastructure. Paid software subscriptions grew by 30% last year. In 2025, we made meaningful progress in Ford Model E, improving structural costs, our mix of higher margin products, and driving adoption of affordable, high-volume vehicles. Model E delivered revenue and volume growth of 73% and 69%, respectively, driven by new product introductions in Europe. EBIT losses for the year improved to $4.8 billion, reflecting fewer losses on Gen One products, partially offset by increased investment in our Gen Two products as we prepare for the launch of our UEV Platform in 2027.
Pro achieve this in the face production loss of student novellis normalization in US industry pricing and more commoditized areas like government in advance. And the challenging microeconomic and Regulatory and state in Europe where we achieved market share growth.
In the US up 6% in Superduty, had its best sales in over 20 years of 10%.
Pro continues to evolve, its business by diversifying revenue streams in building out its high margins.
Service infrastructure, subscriptions, grow 30% this year.
In 2025, we made meaningful progress, in Ford modeling improving. Structural costs, our mix of higher margin products, in driving, adoption of affordable, high-value vehicles.
Model, E, delivered, revenue and volume growth of 73% in 69% respectively.
Driven by new product, introductions in Europe.
EV losses for the year improved to $4.8 billion.
Reflecting fewer losses on Gen 1 products.
Sherry House: The lower Gen One losses were driven by cost reductions and higher volume in Europe, where margins are stronger. Lastly, in December, we rationalized the role of pure EVs in our near-term product portfolio based on changing market realities in the US. Our disciplined approach to capital allocation will significantly improve the run rate of the business going forward. Our performance in Ford Blue was supported by our industry-leading power of choice and strength of our truck and SUV franchises. Revenue was roughly flat, as higher net pricing and the strength of our product lineup offset most of the 5% decline in wholesale sales, which includes disruption from Novelis. In the US, Blue had the two best-selling hybrid trucks. Bronco had record sales, and Explorer was the number one three-row SUV. Our higher-margin Raptor franchise also had record sales.
Partially offset by increased investment in our Gen 2 products is we prepare for the launch of our ueb platform in 2027.
The lower gen 1, losses, were driven by cost reductions in higher volume in Europe, where Marge jogger.
Lastly, in December, we rationalized the role of cury bees in our near-term, product portfolio, based on changing Market realities in the US.
Our disciplined approach to Capital, allocation will significantly improve the Run rate of the business going forward.
our performance in Ford blue with supported by our industry-leading, power of choice, in strength of our truck and suv franchises,
Revenue was roughly flat. It's higher net, pricing and the strength of our product lineup offset most of the sales, which include disruption novellas,
In the Blue, at the two best-selling hybrid trucks. Bronco had record sales, and Explorer was the number one 3-row SUV.
Sherry House: Blue delivered $3 billion in EBIT as lower warranty, other cost improvements, and growth in software and physical services were more than offset by planned and unplanned lost production and adverse exchange. Ford Credit delivered full-year EBT of $2.6 billion and distributions of $1.7 billion. EBT was up 55% for the year, reflecting improved financing margin. Ford Credit continues to originate a high-quality book with US retail and lease FICO scores exceeding 750. We are excited about the recent approval of our industrial bank application. This long-term initiative will expand our capabilities, enabling us to offer additional savings options to customers, further diversify and lower our cost of funding over time. So let me turn to our 2026 outlook.
Our higher margin Raptor. Franchise also had record sales,
Blue delivered $3 billion EBIT as lower warranty, other cost improvements, and growth in software and physical services. For more than that, I planned and unplanned loss production and adverse exchange.
Ford Credit delivered full-year EBT of $2.6 billion.
And distributions of 1.7 billion.
EBT was up 55% for the year.
Reflecting approved financing margin.
With us retail and Lease FICO scores exceed. 750,
We are excited about the recent approval of our Industrial Bank application.
This long-term initiative will stand our capabilities, enabling us to offer additional savings options to customers, further diversify, and lower our cost of funding over time.
Sherry House: For the full year, we expect company-adjusted EBIT of $8 billion to $10 billion, adjusted free cash flow of $5 billion to $6 billion, and capital expenditures of $9.5 billion to $10.5 billion as we shift capital to higher return growth opportunities across our portfolio, including roughly $1.5 billion for Ford Energy. Our full-year outlook for the industry assumes a US SAAR of 16 million to 16.5 million in flat industry pricing. Excluding Novelis, tailwinds and headwinds for Ford include positive market factors, including favorable mix associated with the sunset of low-margin nameplates and benefits from changes in the US regulatory environment. Flat costs, which I would like to unpack further. We expect lower tier costs of about $1 billion, reflecting a full year's worth of credit expansion.
So, let me turn to our 2026 Outlook.
For the full year, we expect company, adjusted evidence of 8 billion to 10 billion.
Adjusted free cash flow of 5 billion, 6 billion.
In capital expenditures of $9.5 billion to $10.5 billion, as we shift capital to higher return growth opportunities across our portfolio, including roughly $1.5 billion for Ford Energy.
Our full year outlook for the industry of things.
A USR of 16 million to 16.5 million in flat industry pricing.
Excluding novellas.
Tailwinds and headwinds for Ford.
Include houses of Market factors, including favorable, mix associated with sunset of low margin name plates and benefits from changes in the US regulatory environment.
Flat cost, which I would like to unpack room.
We expect lower care-of costs of about $1 billion.
Sherry House: We also expect further material and warranty cost reductions building off our momentum in 2025. These combined savings allow us to absorb about $1 billion of higher commodity prices, driven by inflation and pressure on DRAM, as well as incremental investment in support of our UEV Platform, the ramp of Ford Energy, and cycle plan actions that will drive higher return growth in 2027 and beyond. Additionally, we expect our high-margin software and physical services profit to grow by about 6.5%. Now, let me frame Novelis for you. We expect year-over-year improvement of about $1 billion, which is back half-weighted. This includes $1.5 to 2 billion of temporary costs, including tariffs, to ensure continuity in aluminum supply. These costs are not expected to be repeated in 2027.
Reflecting a full year's worth of credit expansion.
We also expect further material and warranty cost reductions building off our men 2025.
These combined savings allow us to absorb about 1 billion of high commodity prices driven by inflation and pressure, as well as incremental investment in, support of our yui platform, the ramp energy cycle plan actions that will drive higher return growth in 2027 and Beyond.
Additionally, we expect our high margin software and physical Services profit to grow by about 6.5%.
Now, let me frame novellas for you.
We expect year-over-year Improvement of about 1 billion.
Which is back half weighted.
This includes 1 and a half to do 2 billion of temporary costs, including tariffs to ensure continuity in Aluminum Supply.
Sherry House: From a calendarization perspective, we expect our Q1 EBIT to be roughly flat sequentially as we continue to work through the impacts of Novelis. We expect to approach a more normalized EBIT in the Q2, with a plan to hit our underlying EBIT run rate level in the second half as volume stabilizes and our portfolio optimization takes hold. To help you better understand this calendarization, we have included a first half, second half bridge for you in our earnings deck. Our segment outlook anticipates another robust year at Ford Pro, with EBIT of $6.5 billion to $7.5 billion. The fundamentals of Pro's business are strong. In North America, we expect continued share growth in an industry that's roughly flat....
These costs are not expected to be repeated in 2027.
From a characterization perspective, we accept our first quarter ebit to roughly flat sequentially as we continue to work through the impact of novellas.
We expect to approach a more normalized debit in the second quarter with a plan to hit our underlying ebit run rate level in the second. Half is volume stabilizes and our portfolio. Optimization take hold.
To help you better understand this challenge. We have included a first half second half bridge for you and our earnings deck.
Sherry House: enabled by conquest sales in a diversified channel mix, which we believe to be well-balanced at roughly 1/3 large corporations, 1/3 SMB, and 1/3 government and rental fleets. We still see untapped demand for crew cab and diesel Super Duty, and most of our contractual deals for the year have already been agreed to. Ford Pro continues to improve its durability by growing its mix of profitable software and physical services globally through precision customer targeting, demand generation initiatives, and Pro-specific solutions. While Pro's underlying business continues to strengthen, we expect 2026 results to be dampened by the near-term impact in Novelis, ramping Oakville to bolster Super Duty capacity in Canada, and a tougher regulatory climate in Europe. We expect losses of $4 billion to $4.5 billion for Ford Model E.
Our second outlook anticipates, another robust year at 4 Pro with EV bit of 6 and a half billion to 7 and a half billion. The fundamentals of pro business are strong in North America. We expect continued share growth in an industry. That's roughly flat enabled by Conquest sales in a diversified Channel mix which we believe to be well balanced at roughly 1 third large corporations, 1 third SMB, and 1, third government and Rental fleets.
We still see unap demand for crew, cab and Diesel Superduty in most of our contractual deals for the year have already been agreed to.
For pro continues to improve its durability by growing. Its mix of profitable software and physical sources globally through Precision, customer targeting demand generation initiatives in Pro specific Solutions.
While prose underline business continues to strengthen, we expect 2026 results to be dampened by the near-term impact in novellis ramping, Oakville to bolster Superduty capacity in Canada, in a tougher regulatory climate in Europe.
Sherry House: This reflects about $1.6 billion of improvement in Gen One products, driven by lower US volume and cost savings from restructuring the business. These savings will be partially offset by around $600 million in higher Gen Two costs as we near the launch of LFP batteries in Marshall, Michigan, and our UEV platform in Kentucky, along with roughly $400 million in startup costs for Ford Energy. The team is aggressively working on additional Gen One cost reductions and ways to further optimize the market equation in the US and Europe. We continue to target Model E reaching breakeven in 2029. For Ford Blue, we expect EBIT of $4 to 4.5 billion, reflecting improvement in the underlying business as we recover from Novelis. Favorable mix as we lean into our revenue and profit pillars and continued progress and cost.
We expect losses of $4 billion to $4.5 billion for Ford Model E.
This reflects about $1.6 billion of improvements in Gen 1 products, driven by lower U.S. volume and cost savings from restructuring the business.
These savings will be partially offset.
Startup costs for Ford energy.
The team has aggressively working on additional gen 1 cost reductions in ways to further optimize the market equation in the US and Europe.
We continue to target Model E, reaching break-even in 2029.
For Ford blue, we expect ebit of 4 to 4 and a half billion reflecting Improvement in the underlying business as we recover from no less.
Sherry House: Exciting new products like Bronco RTR and Mustang Dark Horse SC will help us expand our off-road leadership and grow our performance business. Furthermore, like Pro, we expect continued growth in our software and physical service offerings for retail customers through increased convenience and engagement. Lastly, Ford Credit CBT will be about $2.5 billion. Relative to special items for 2026, in December, we announced actions to rebalance our EV portfolio, assets, and launch more multi-energy platforms. In 2026 and 2027, we expect to record about $7 billion in charges related to our updated EV strategy and the expected disposition of our BOS investment. Cash expenditures are expected to be up to about $5.5 billion, with most of this weighted in 2026.
Favorable mix as we lean into our revenue and profit pillars, and continued progress on cost.
Exciting new products like Bronco. RTR in Mustang, Darkhorse Effie will help us expand our off-road leadership and grow our performance business.
Furthermore like Pro, we expect continued growth in our software and physical service offerings for retail customers during increased convenience and engagement.
Lastly, Ford Credit CBT will be about 2.5 billion.
Relative to special items for 2026.
In December, we announced actions to rebalance our EV portfolio in the Assets in launch. More multi-energy platforms.
In 2026 and 2027, we expect to record about $7 billion in charges related to our updated ED strategy and the expected disposition of our BOS investment.
Sherry House: As I mentioned at the beginning, our 2025 performance demonstrated progress against our Ford+ plan, not just in growth and profitability, but also quality, capital discipline, the right product portfolio, and consistent cash generation. Our underlying business is strong, and we are relentlessly working to strengthen it further as we continue to focus on improving both quality and cost, as well as returns and cash flow. I'll now turn it over to the operator so we can start Q&A.
Cash, expenditures are expected to be up to about 5.5 billion with most of the weighted in 2026.
As I mentioned at the beginning, our 2025 performance demonstrated progress, against our Ford plus plan, not just in growth and profitability, but also quality Capital discipline, the right product portfolio and consistent cash generation.
Or underlying business is strong and we are relentlessly working to strengthen it further as we continue to focus on improving both quality and cost as well as for returns and cash flow.
I'll now turn it over to the operator, so we can start Q&A.
Operator: We will 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 star nine on your keypad, and when you are called on, please unmute your line and ask your question. Please limit to one question and one follow-up today. We will now pause a moment to assemble the queue. Our first question will come from Dan Levy with Barclays. Your line is now open. Please go ahead.
We will now move to our question and answer session. If you 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, and when you are called on, please unmute your line. After your question, please limit yourself to one question and one follow-up today. We will now pause a moment to assemble the queue.
Dan Levy: Hi, good evening, and thank you for taking the questions. I want to first start with a question on slide 19 and some of the assumptions you have for 2026, and maybe you can help us unpack the pieces on the market factors, which seem to be quite positive and what's driving the year-over-year increase. Now, I know you said that there's $1 billion of Novelis, but maybe you can help unpack, you know, the magnitude of other benefits you're getting on the mix side, and how that all of this can on powertrain and how all this can offset maybe some of the declines on volume from Escape Corsair, you know, and also the more competitive environment, and maybe just a word on tariff assumptions as well. Thank you.
Our first question will come from Dan Levy with Barclays. Your line is now open. Please go ahead.
Hi uh, good evening and thank you for taking the questions.
Um, wanted to first start with the question on uh, slide, 19, and some of the assumptions you'd have for 2026, and maybe you can help us unpack the pieces on, uh, the market factors which seem to be, uh, quite positive and what's driving the year-over-year increase. Now, I know you, you said that there's a billion dollars of novellas but maybe you can help unpack.
You know, the magnitude of other benefits on the mixed side, um, and and how that all of this can on powertrain, and how all this can offset. Maybe some of the declines on volume from Escape Corsair. Um, you know, and also the more competitive environment and maybe you could just a a word on on tariff assumptions as well, thank you.
Sherry House: Yeah, sure. Thank you so much, Dan, for the question. So let me just start with the Novelis improvement of $1 billion year-over-year, and I'll unpack that slightly for you. That assumes $2.5 to 3 billion, reflecting the non-recurrence of 2025 losses and capacity actions at Dearborn and Kentucky truck plants. So you'll recall that we had about $2 billion of losses last year. The expectation is that would be non-recurring as we enter into 2026. Originally, we thought we would make up about a billion of that. Now we think we'll make up a half a billion to a billion based on the second fire in November. That's going to be offset by a one and a half to $2 billion, a temporary cost, and that's to ensure supply continuity.
So let me just start with the novelas Improvement of 1 billion year-over-year, and I'll unpack that slightly for you that assumes 2 and a half to 3 billion reflecting the non-recurrence of 2025 losses and capacity actions that you're born in Kentucky Truck plants. So you'll recall that we had about 2 billion of losses last year. The expectation is that would be non-recurring as we enter into 2026.
Originally we thought we would make up about a billion of that. Now we think we'll make a half a billion to a billion based on the second fire in November.
Sherry House: There will be tariffs and premium freight associated with that supply continuity of aluminum until we can get the Novelis hot mill back up and running sometime between May and September. With respect to the positive market factors, yes, it does include the sunset of low-margin nameplates, namely Escape, but there's also benefits that we expect to achieve from changes in the US regulatory environment, and the biggest impact there would be about $0.5 billion less of credits in the US. You'll note that we had about $0.7 billion of credits last year, but about $0.5 billion of that is attributed to the US. Cost, roughly flat, excluding the Novelis impact. We had industrial cost improvements. We're expecting maybe around $1 billion, again, in material and with warranty costs. We're expecting tariff costs lower by $1 billion year over year.
We that's going to be offset by a 1 and a half to 2 billion in temporary costs and that's to ensure Supply continuity. There will be tariffs and premium Freight associated with that Supply continuity of aluminum until we can get the nollas Hotmail back up and running sometime between May and September.
And the biggest impact there would be about a half a billion less of credits in the US.
You'll note that we had about $7 billion of credits last year, but about half a billion of that is attributed to the U.S.
Sherry House: But again, that's going to be offset by the Novelis temporary costs in 2026. We'll have higher commodity prices, we think, and there's also investment in UEV, Ford Energy, and the cycle plan that we spoke about. We also expect there to be continued growth in the high-margin software and physical services businesses that we talked about in Pro, but across all of retail, including Blue. Other factors, you know, are largely balanced, exchange, compliance, etc.
Costs are roughly flat. Excluding the Novellis impacts, we have industrial cost improvements. We're expecting maybe around $1 billion again in material and warranty costs. We're expecting tariff costs to be lower by $1 billion year over year, but again, that's going to be offset by the Novellis temporary costs in '26. We'll have higher commodity prices, we think, and there's also investment in UV energy and the cycle plan that we spoke about.
We also expect the continued growth in the high margin software and physical Services businesses that we talked about in Pro but across all the retail including blue.
Other factors you know are largely balanced exchange compliance, etc.
Dan Levy: Great, that's.
Sherry House: Did you have a further question on tariffs, or did I answer it?
Dan Levy: Oh, no. I think you covered the tariff question. Thank you. As a follow-up, Jim, I'd like to just ask conceptually how you're looking at the investment in, you know, EV and AV. And really, it's just in the context of if we look at the arc of investment you had the past five years. We know that you and others went through this very heavy push on EV, AV software, sort of had mixed results. And, you know, you took a big impairment. A lot of companies took big impairments on the back of what's happened with the regs. But it seems like you're resetting strategy now. There's a fresh push on EV with UEV. You're making more investments on ADAS and software.
Right. That's— and then did you have a further question on Tariffs or— today? I think you covered the Tariff question. Um—
Dan Levy: So help us understand, in light of the experience the last few years and how maybe capital inefficient it was for the industry as a whole, how you're making sure that this new round of investments is being done in a more capital-efficient manner?
Thank you. Um, as a follow-up. Jim, I'd like to just ask conceptually how you're looking at the investment in, you know, uh, EV and, and a, and really, it's just in the context of if we look at the Arc of investment, you had the past 5 years, we know that you and others went through this Debbie push on. EV a software sort of mixed results. And, you know, you took big impaired, a lot of companies took big impairments on the back of, uh, what happened with the rags, but it seems like you're resetting strategy. Now there's fresh push on Eevee with u. EV, you're making more Investments on 8 ass and software so help us understand in light of the experience, the last few years and how maybe Capital inefficient was for the industry as a whole, how you're making sure that this new round of Investments is being done in a more Capital efficient manner.
Jim Farley: Thank you for your question. So, I think the customer has spoken. That's the punchline. The customers in their duty cycle have spoken. There's enough choice around the world on electrification for us to cherry-pick customers' choices around the world and come up with the right strategy of not only in the US, but around the world. In the US, you hit it. Our bet is on the UEV. We believe this platform, localized in LAP, will hit the majority of profitable EVs sold in the US, which are $30,000 to $35,000 EVs, high volume. Tesla's shown that they could, we can make money in that market, even without subsidy from the government, at the right cost level. But that's only part of our strategy.
Thank you for your question.
So um, I I think the customer has spoken that's the punch line.
The customers and their duty cycle has spoken. There's enough Choice around the world on electrification for us to cherry-pick customers choices around the world, and come up with the right strategy of not only in the US, but around the world in the US, you hit it. Our bed is on the UV. We believe this platform localized in lap. We'll hit the majority of
profitable EVs sold in the US, which are
30, 35000 EVS, high, volume Tesla's shown that they could, we can make money in that market.
Even without subsidy from the government at the right cost level.
Jim Farley: In addition to that, we're betting on hybrid across our lineup and EREV, where it makes sense for our duty cycle, like large trucks, where towing is a real important application, and both FHEVs and pure electric will definitely not work. So we're looking to make CO2 reductions across our lineup, but we're doing it in a very efficient way. Overseas, the story is a bit different. Overseas, we're looking to piggyback, like in Europe, with Renault and Volkswagen, on capital-efficient, high-scale, lower-cost solutions like B-car EVs in Renault. We think that is a market, depending on how the EU and the UK incentivize them, where that can be profitable.
But that's only part of our strategy.
In addition to that, we're betting on.
Hybrid across our lineup and have where it makes sense for our duty cycle, like large trucks. Where towing is a really important application, and both have. And pure electric will definitely not work.
So we're looking to make CO2 reductions across our lineup but we're doing it in a very efficient way.
Overseas, the stories are a bit different.
um,
overseas. We're looking to piggyback,
Like in Europe with Renault and Volkswagen on Capital efficient, high-scale lower cost Solutions like Dakar EVS in Renault.
Jim Farley: Elsewhere, we'll be opportunistic between PHEVs and hybrids for Ranger, our body on frame, and our growing export business from China will be opportunistic based on that customer in Australia or South Africa or Brazil, exactly what they want. I think the real question that I ask myself is: How will the Chinese change the game with all of these in terms of pricing power, given the overly competitive, subsidized reality, and, for example, in January, the Chinese market being down 25% year-over-year? If that persists, you know, we will have to future-proof our cost around that pricing reality. That and the regulatory environment, I think, are the wild cards in this strategy, but that's the same wild card every OEM has. But I do believe this is the right allocation of capital.
We think that is a market depending on how the EU and the UK incentivize them, but that can be profitable.
Elsewhere will be opportunistic between P haves and hybrids for Ranger. Our body on frame and our growing export business. From China, will be opportunistic based on that customer in Australia or South Africa, or Brazil, um,
Exactly what they want.
Um, I think the real question.
That I asked myself.
How will the Chinese change the game with all of these, in terms of pricing power?
Given the overly competitive subsidized reality and for example, in January the Chinese market being down, 25% year-over-year. If that persists,
You know, we will have to Future proof. Our costs around that pricing reality.
but that's the same wild card every OEM has
and,
Jim Farley: It's a combination of partnerships where it makes sense, efficient partial electrification investments where we have revenue power, and really hitting the EV market in the core of the market, in our home market, where there's not a lot of competition.
But I do believe this is the right allocation of capital. It's a combination of Partnerships where it makes sense.
Efficient partial electrification Investments, where we have Revenue power.
And really hitting the EV market in the core of the market in our home market, where there's not a lot of competition.
Dan Levy: Great. Thank you.
Right. Thank you.
Operator: Your next question will come from Joseph Spak with UBS. You may now unmute and ask your question.
Sherry House: Thanks. Good afternoon, everyone. Sorry to go back to this so quickly, Sherry, but just to make sure I got this Novelis impact right in my head here. So it was a $2 billion impact in 2025. You're talking about-
Your next question will come from Joseph Spak with UBS. You may now unmute and ask your question.
Thanks. Good afternoon everyone. Um
Sorry to go back to this so quickly. Sorry, but just to make sure I got this, um,
Joseph Spak: ... That's lower by $1 billion in 2026. So $1 billion, but that's still inclusive of $1.5 to 2 billion of temporary costs. So the delta to get you back higher, I guess, is the volume portion of it? So, I guess, you know, put another way, if all that temporary sourcing costs and logistics and higher tariffs is really temporary, you're basically saying that $9 billion EBIT is, you know, more like 10.5 or a little bit above that. Is that the right way of thinking about that?
Novelis impact right in in, in my head here. So it was a 2 billion dollar impact in 25 we were talking about, uh, that's lower by a billion in 26, so a billion but that's still inclusive of a billion and a half to 2 billion of temporary costs. So the Delta to get you back higher, I guess is the volume portion of it. So I guess, you know, put put another way, if if if, if all that.
Sherry House: Mm-hmm. It is a fair way to think about it. Yeah. So basically, we'd have nonrecurrence of the $2 billion from last year, right? So that, that would start your 2026 better. And then we had planned on being able to make up about $1 billion of that. Now we think it's probably $0.5 billion to $1 billion. So that's how I said top line, $2.5 to 3 billion, but we have temporary costs, and those are going to be $1.5 to 2 billion. So when you take that off, that gets you with a net positive $1 billion for the year. And I do agree that you would have some tailwinds on that going into 2027.
Temporary sourcing costs and Logistics and higher, higher tariffs is really temporary. Um your your basically saying that that 9 dollar Eid is, you know, more like 10 and a half for or a little bit above that. Is that is that the right way of thinking about that?
It is a fair way to think about it. Yeah. So basically
Jim Farley: Given Novelis is so important, Kumar, do you want to say anything about the variability of those costs, and how reliable is our aluminum supply now?
non-recurrence of the 2 billion from last year, right? So that that would start your 2026 better and then we plan on being able to make up about a billion of that. Now we think it's probably a half a billion to a billion. So that's how I said, Top Line 2 and a half to 3 but we have temporary costs and those are going to be 1 and a half to 2. So we take that off that gets you with the net positive 1 billion for the year. And I do agree that you would have some Tailwinds in that going into 2027.
Kumar Galhotra: Okay. So two facts there, Jim. We expect the mill to start back up somewhere in the middle of the year, the range between somewhere May and September. We have a team working closely with Novelis on the ground there, so we know exactly where things stand. The more important part is the second part of your question. We have contingency plans to secure sufficient supply for various scenarios, no matter where we end up with the start date between May and September.
Given novella, this is so important, Kumar. Do you want to say anything about the variability of those costs? Uh, and how reliable is our aluminum supply now? Okay, so two facts there, Jim. We expect the mill to start back up somewhere in the middle of the year, in the range between somewhere May and September.
We have a team working closely with Novellas on the ground there, so we know exactly where things stand.
Um, but the more important part is the same part of your question, we have contingency plans to secure, sufficient life, for various scenario, no matter where we we end up with the start date between between man and September.
Joseph Spak: Okay. Thank you for that. And then just the second question, another one, I guess, on market factors. I want to focus, I guess, specifically on two areas. You know, one is, you've got some competitors out there that are sort of trying to regain share in North American trucks and European LCVs. So how you think about the market impact there? I know, I know you mentioned in your remarks some, you know, affordable trucks and Pro. And then even beyond that, like, is there any more granularity or color you could give us as to sort of what gets you comfortable with the, you know, Ford-specific market mix factors, that can sort of aid profitability to help offset some of these, some of these costs?
Okay.
Thank you for that. Um, and then just the second question. Um, another one I guess on market factors, and I want to focus, I guess specifically on two, um,
Uh, you know, one is, um,
You've got some competitors out there that are sort of trying to to to regain share and North American Truck and European lcvs. So how you think about the market impact there? I know I know you mentioned in your remarks some you know, affordable trucks and pro. Um and then
Even beyond that, um, like is there any more granularity or color you could give us—just sort of what gets you comfortable with the, you know, forward-specific market mix factors, um, that can sort of aid, um, profitability to help offset some of these, some of these costs?
Andrew Frick: Yeah, Joe, it's Andrew. Correct. First of all, let me comment on the first part around full-size pickup. That is always a competitive segment, so this is nothing new for us. And as the leader, we have to be ready for challenges at all times. We have a great pickup lineup right now, a great F-Series lineup. We cover the breadth of the entire segment, and we've actually been growing. In fact, last year, as Jim mentioned, we grew 2 points of revenue share and 1.5 points of volume share in 2025, and we've actually expanded our truck leadership position over our key competitors each of the last two years, and by a sizable margin. But as we enter this year in 2026, we, of course, always approach it humbly.
Yeah, Joe, it's Andrew, correct? Um,
Andrew Frick: Our dealer network is really set up and is a real strength for us. They continue to invest in the truck business. Our stock positions are on the low end of our day supply range right now, and our overall market approach is to remain disciplined in our market equation, balancing the stock share and our incentive spending. We're going to continue to maximize F-Series and powertrain mix as we approach that segment. Really, on the second part around broader market in our portfolio, you know, we're looking to improve our mix based on customer demand across the whole portfolio, and Sherry mentioned some of the product mix impacts. We started making some of those in the second half of last year, based on the changing conditions.
First of all, let me comment on the first part around full-size pickup. That is always a competitive segment. So this is nothing new for us. Um, and that leader we've we have to be ready for challenges at all times. Uh we have a great pick up lineup right now, great app series lineup. Um, we cover the breadth of the entire segment and we actually been growing uh, in fact, last year as Jim mentioned, we grew 2 points of Revenue, share and 1, and a half points of volume share in 2025, and we've actually expanded our truck leadership position over our key competitors. Each of the last 2 years and and by a sizable margin. But as we enter this year in 26, we of course, always approached it humbly. Um, our dealer network is really set up. Uh, and as a real strength for us, they've continued to invest in the truck business. Our stock positions are on the low end of our of our day supply range right now and our overall Market approach is to remain disciplined in our Market equation balancing, the stock share, and our incentive spending. Um, and we're going to
Andrew Frick: For example, we're increasing hybrids on Maverick to address demand, while F-150, we're increasing V8s, Lariats, Raptors, both again, tied to customer demand. So part of our ongoing efforts to optimize the market equation, our approach is to balance our mix while also increasing our revenue. And that was evident last year as we increased our share revenue again on pickups and four-by-four vehicles.
We as we approach that segment um and really on the second part around broader market and our and our portfolio, you know, we're looking to improve our mix based on customer demand across the whole portfolio and Sherry mentioned, some of the product mix impacts. We started making some of those in the second half of last year, um, based on the changing conditions, for example, increasing
Jim Farley: Alicia, any comment from you on Pro for our assumptions this year for market equations? What you're seeing, given that we're competitively quoting for several months now.
Hybrids on Mavericks to address demand, while F-150 were increasing V8 Lariat. Raptors both Again, by the customer demand. Um, so part of our ongoing efforts to optimize the market equation where our approach is to balance our mix while also increasing our Revenue. Um, and that was evident last year as we increased our our share Revenue again on pickups and 4 by 4 vehicles. Alicia in coming from Pro for our assumptions this year for Market equations, what you're seeing given that we're competitively quoting for several months now.
[Company Representative] (Ford Motor Company): Start it off, we've been a leader in Europe from a fleet perspective for the past 11 years, and it was a very competitive market. Last year, we expect it to continue to be. Right now, we're seeing strong demand from an orders perspective on our light commercial vehicle side. We absolutely have a very competitive environment, but we have very competitive products, and we also have services that we're continuing to invest in and grow, where we're offering our fleet customers solution for uptime and productivity. So we're seeing strong demand for orders coming through the quarter, and we've also seen just solid pricing, right? And so our initial assumption was that we'd see a small decline in pricing to start the year, and we actually have not seen that yet.
Started off—uh, we've been a leader in Europe from a fleet perspective for the past 11 years, and it was a very competitive market last year. We expect it to continue to be. Right now, we're seeing strong demand from an orders perspective on the live commercial vehicle side. Uh, we absolutely have a very competitive environment; we have very competitive products, and we also have services that we're continuing to enhance and grow, where we're offering our Fleet customers solutions for uptime and productivity. So, we're seeing strong demand for, um, orders coming through the quarter. We also see...
[Company Representative] (Ford Motor Company): But we're very tied in to what's happening in the market and making sure that we're responding there for customers.
Um, um, just solid pricing, right? The assumption was that we would see, um, a small decline in pricing, um, to start the year. And we actually have not seen that yet, but we're very tied into what's happening in the market and making sure that we're responding there for customers.
Jim Farley: Thank you.
Sherry House: Your next question will come from Emmanuel Rosner with Wolfe Research.
Thank you.
Emmanuel Rosner: ... Great. Thank you so much. My first question is on capital expenditure. So you're making these investments into higher return products and technology going forward. But I think at the income statement level, it's roughly offset by ongoing cost savings. So you're investing, if I get the numbers right, maybe an extra $1 billion, then you have $1 billion in savings. At a CapEx level, it seems like you're actually taking it up, and I was a bit surprised by this. So how should we think about the CapEx needs, you know, for these investments over the next few years? Is this sort of like a new run rate, or is this sort of like an initial boost needed because of the energy storage investment?
Your next question will come from Emmanuel Rosner with Wolfe Research.
Great, thank you so much. Um, my first question is on capital expenditure so you're making these investments into higher return, uh, products and Technology going forward. Um, but I think the income statement level, it's roughly offset by ongoing cost savings. So you're investing if I get the numbers, right, maybe an extra billion dollars then you have a billion dollars in savings and the capex level seems like you're actually taking it up um and it was a surprise by this. So how should we think about the capex needs you know for these Investments for the next few years is this sort of like a new a new run rate or is there sort of like a an initial boost uh needed because of the energy storage investment?
Sherry House: Yeah, thank you for the question, Emmanuel. So guidance reflects an increase in capital spending of a little more than $1 billion, as you noted, so $9.5 to 10.5 billion. That increase is driven by our investment in Ford Energy, which is the largest portion of it, is expected to be in 2026. We had talked about a $2 billion investment in Ford Energy, and $1.5 billion of it is in 2026. The mix of our capital spending continues to shift. We have a new capital allocation process that's changed, that's really pushing our capital into more creative areas of the business. And we've consistently stayed nimble, you know, adjusting to customer demand and a changing regulatory environment as well.
Yeah, thank you for the question, Emmanuel.
So guidance, um, reflects an increase in capital spending of a little um more than 1 billion as you noted. So, 9 and a half to 10 and a half billion.
That um increase is driven by our investment in Port energy which is the largest portion of it is expected to be in 2026. We had talked about a 2 billion dollar investment in Ford energy and 1.5 billion of that is
like 6.
Sherry House: So, what I would say is that roughly 75% of our capital over the plan period is going into our higher return, larger truck and multi-energy portfolio, and in that balance, 25% is your Ford Energy and continued modeling investments like in UEV, EREV, and things of that nature.
Um, the mix of our capital spending continues to shift. We have a new capital allocation process that's changed. It's really pushing our capital into more creative areas of the business, and, um, we've consistently stayed nimble, you know, adjusting to customer demand and, uh, the changing regulatory environment as well.
Jim Farley: The goal for that capital allocation is very clear. It's to get to 8% EBIT margin for our company. We are investing more in blue as well, hybrid and new products that will be very profitable. And we are decelerating the investment in Model E, even though it's still at high levels, as Sherry said, we are descaling that investment. The goal is to set up the company over the next couple of years to be that 8% margin company, and that's the kind of capital we need to invest.
So um, what I would say is that roughly 75% of our Capital over the plan period is going into our higher return, larger truck and multi-energy portfolio. And then that balance 25% is your Ford energy and continued modeling Investments like in UV. E-rev and things of those of that nature.
And the goal for that capital allocation is very clear—just to get the 8% EBIT, largely for the company. We are investing more in Blue as well, hybrid, and new processes that will be very profitable.
Emmanuel Rosner: Thank you. Then as a follow-up, still on the Model e then. I guess to get to this ultimate target, you probably, you know, also have to execute on bringing back Model e to profitability. Can you talk maybe about, you know, some of the levers and cadence between now and 2029? It seems like you're having a lot of savings this year on Gen 1, but investments on, you know, the new generation. Is the improvement towards breakeven, is that gonna be back-end loaded towards 2029, or can we expect some steady improvement throughout the time period?
And we are decelerating the investment in the model, even though it's still at high levels, Sherry said, we are detailing that investment. So the goal is to set up the company over the next couple years to be that 8% margin company. And that's the kind of capital. We need to invest
Generation, um, is the improvement towards break even— is that going to be back-end loaded towards 2029? Or can we expect some steady improvement throughout the, uh, the time period?
Sherry House: Yeah, thank you. I think you can expect steady improvements throughout the time period. As the UEV products come on board 2027 and then get even more profitable in 2028 and beyond, with additional variants, that's gonna improve the profit margin, as will the introduction of B vehicles in Europe, that also will be coming on board as well. And all of that's gonna be happening as some of the Gen one, you know, becomes lower volume.
Yeah, thank you. I think you can expect steady improvements throughout the time period. Um, as the UEV products come on board in '27 and then get even more profitable in '28 and beyond with additional variants, that's going to improve the profit margin, as will the introduction of B vehicles in Europe that also will be coming on board as well. All that's going to be happening as some of the Gen 1, you know, becomes lower volume.
Emmanuel Rosner: Thank you.
Thank you.
Operator: Your next question will come from Ryan Brinkman with J.P. Morgan. Your line is now open. Please feel free to unmute.
Ryan Brinkman: Hi, thanks for taking my question. I was intrigued by Jim's comment that full year 2025 tariff cost tracked $2 billion versus the $1 billion that was communicated at the time of the Q3 earnings due to a late year change in tariff credits on auto parts, such that full year EBIT pro forma for this would have been $7.7 billion, which is substantially better than the $6.0 to $6.5 billion that was guided to on the Q3 call. Firstly, can you help on what exactly was the regulatory change? I'm aware of the change to tariff on the non-USMCA compliant parts. I thought that was a positive, though, allowing for a longer phase out to the offsets there.
Your next question will come from Ryan Brinkman with JP Morgan. Your line is now open. Please feel free to mute.
Ryan Brinkman: Then secondly, the fact that, you know, full year EBIT pro forma for the unexpected headwind tracked, what, $1.2 to 1.7 billion better than expected. Can you talk about what is it that tracked so materially better than at the time of Q3 earnings? And then finally, as we head into 2026, you characterized the headwind as maybe one time. Is there any headwind relative to the tariff credit change that continues with you, or did it only impact Q4? Thanks.
Hi, thanks for taking my question. Uh, I was intrigued by Jim's comment that full year 2025, tariff cost track 2 billion versus the 1 billion. That was communicated at the time of the 3Q earnings due to a late year, change in tariff, credits on Auto Parts, such that full year, ebit proforma for this would have been 7.7 billion which is substantially better than the 6.0 to 6.5 billion. That was guided to on the 3Q call. Personally can you help on what exactly was the regulatory change? I'm aware of the change to tear up on the the non usmca compliant. Parts of that was a positive though allowing for a longer uh, phase out to the to the offsets there. And and then
Secondly, the fact that you know, for your event, pro forma for the unexpected headwind track, what’s $1.2 to $1.7 billion better than expected? Um, can you talk about what is it that tracked so materially better than at the time of 3Q or names? And then finally, as we head into 2026, you characterized the headwind as maybe one-time. Is there any headwind relative to the tariff credit change that continues with you, or did it only impact the fourth quarter? Thanks.
Jim Farley: Go ahead, Steve. Great question, and a very important question for Ford, because we're the most American company. We have a very different footprint than our competitors. It's largely related to parts recovery and the timing. Go ahead, Steve.
Steve Croley: Sure. Thanks. Yes, the short explanation is a credit that we have against tariff liabilities on parts became effective on 1 November, and we had understood it would become effective instead on 3 May. And so that delta is about the $1.9 billion that Sherry referenced. It will mean to your last question, that going forward, we can use this credit and this is a one-time, you know, a one-time hit. But that was the hiccup that we experienced in December and accounts for about $1 billion of the difference.
Go ahead. Steve, I think we, we can all great questions and, uh, very important question for for Ford because we're the most American company, we have a very different footprint that our competitors. It's largely related to Parts recovery and the timing. Go ahead, Steve sure. Thanks. Yes. The the short explanation is a a a credit that we have against uh terribly abilities. On Parts became effective on November 1st and we had understood, it would become effective instead on May 3rd. Um, and so that Delta is about the 1 billion, 900 million that Sherry referenced
Ryan Brinkman: Okay, great.
Sherry House: And then you had a-
It will mean here here to your last question that going forward, we can use this credit and this is a 1-time, you know, a 1-time hit but that was the hiccup uh, that we experienced in December and accounts for about a billion of the difference.
Ryan Brinkman: Yeah.
Sherry House: Oh, sorry. You had a follow-up question about-
okay, you would add
Ryan Brinkman: Yeah.
Sherry House: Just Q4 must have been coming in stronger, given that we would have been at $7.7 billion. You're absolutely right. It was cost. A lot of that was cost, and you might have noted that we said that we ended up with $1.5 billion of cost improvements on a year-over-year basis, versus what we originally were targeting at $1 billion, and it's multiple elements of cost, a little bit of pricing in there, too.
Ryan Brinkman: Okay, very helpful. Thank you. And then just lastly, while I know you don't report EBIT by region, could you speak to the performance in Europe, including how you would rate the strength and profitability of both your passenger vehicle and commercial vehicle businesses there, and how the outlook for the two businesses could be impacted by either the EV portfolio changes announced on 15 December or the agreement that was signed with Renault on 9 December regarding the 2 incremental Ford-branded EVs and cooperation on light commercial vehicles? Thanks.
Jim Farley: Thank you. Well, we've always been very consistent. The core of our European business, our Pro strategy, continues to be very profitable. In fact, this is kind of the first year we've seen the benefits of the VW scale with our one-ton van, where it's worth a lot of money to combine our scale. Your question obviously points to the growing concern around the profit pool for profitable passenger cars in Europe. And that's exactly where the conversation should go when it comes to Europe. We obviously are taking steps to address our profitability of our passenger car business, as we have for many years. Jim Baumbick and the team are very focused on using Renault's platform, especially their B-sized EV, to dramatically reduce our costs and improve the profitability of our EV business in Europe.
A oh sorry. You had a follow-up question about just Q4. Must have been coming in stronger. Um, given that would have been at 7.7 billion. You're absolutely right. It was crossed. Um, a lot of that was cost. And um, you might have noted that we said that we ended up with 1 and a half billion of costs improvements in a year-over-year basis, uh, versus what we originally were targeting at 1 in its multiple elements of cost. A little bit of pricing in there too. Okay, very full, thank you. And then just lastly, while I know you don't report by region. Could you speak to the performance, um, in Europe, including how you would rate, the strength and pro profitability of of both your passenger vehicle and, uh, commercial vehicle businesses there and and how the outlook for the 2 businesses could be impacted by either. The EV portfolio changes announced on December 15th or the agreement that was signed uh with Renault on December 9th, regarding the 2 increment. Ford branded EVs and cooperation on Light commercial vehicles. Thanks
Thank you.
Well, we've always been very consistent. The core of our European business—our Pro strategy—continues to be very profitable. In fact, this is kind of the first year we've seen the benefits of the VW scale with our 1-ton van, where it's worth a lot of money to combine our scale.
Uh, your question, uh, obviously points to the growing, uh, concern around the profit pool for profitable passenger cars in Europe.
And, and, and that's exactly where the conversation should go when it comes to Europe.
We obviously are taking steps to address our profitability of our passenger car business, as we have for many years.
uh Jim baumbach and the team are very focused on using renault's platform, especially their BS sized, Eevee to dramatically reduce
Jim Farley: And we see that as a very critical moment for us. We also have plans, exciting plans for Europe on our passenger cars, but we will play very carefully in specific segments to our, to our strengths, to make sure that not only we build a profitable passenger car business, but we also support our dealers' profitability so they can invest even more in growth in Pro. Now, the real rub is gonna be how the UK and European, the EU, handle the choice between CO2 reduction and jobs. And this is a place where Ford is quite outspoken. Because we're not a national champion, we can really speak on behalf of the customers on what the right balance is between CO2 reduction and where customers really stand, as well as job risk.
In Europe.
Uh and we see that as a very critical moment for us. We also have um plans exciting plans for Europe on our Passenger cars. But we will play very carefully and specific segments to our to our strengths.
Um, to make sure that not only we build a profitable passenger car business, but we also support our dealers profitability so they can invest even more in growth in Pro.
Now, the real love is going to be how the UK and the European, uh, the EU.
Handle the choice between CO2 reduction and jobs.
And this is a place where Ford is quite, um, outspoken, because we're not a national champion.
Jim Farley: I will tell you that most of the variability of that profitable passenger car market is gonna come down to the policies with the EU and the UK governments.
We can really speak on behalf of the customers on what the right balance is between CO2 reduction and where customers really stand as well as job risk.
Ryan Brinkman: Thank you.
And I will tell you that most of the variability of that profitable passenger car market is going to come down to the policies with the EU and the UK governments.
Thank you.
Operator: Your next question will come from Andrew Percoco with Morgan Stanley.
Andrew Percoco: Great, can you hear me? Oh.
Your next question will come from Andrew. Poco with Morgan Stanley.
Great, can you hear me?
Operator: Yes, we can.
Andrew Percoco: Okay, great. Thanks for taking the question.
Operator: We can hear you.
Andrew Percoco: Awesome. Thanks for taking the question. I just wanted to come back to, you know, energy storage, and hoping you can just provide a little bit more context around your capital allocation decision there. And along with that, you know, this is a... I know you're two years away or so from really ramping up that production, but this is a much longer lead time market than your traditional auto market. So I'm just curious if you can share any feedback or context around what customers you might be speaking to and maybe the feedback that you've been receiving, and maybe where you see yourselves really fitting into that market. Thank you.
Yes, we can. Okay, great. Um, thanks for taking the question. Awesome. Thanks for taking the question. Um, I just wanted to come back to, um, you know, energy storage, and hoping you can just provide a little bit more context around your, your Capital Outlook, allocation decision there. Uh, and along with that, you know, this is a
I I know you're 2 years away or so from really ramping up that production, but this is a much longer lead time Market than your traditional auto market. So I'm just curious. If you can share any feedback or or context around what customers you might be speaking to and and maybe the feedback that you've been receiving um and maybe where you see yourselves really fitting into that market. Thank you.
Jim Farley: Sure. It's early days, but at the strategy level, there is no doubt that the growth for battery storage for both data center build-out and grid stability, places like California, Texas, and Florida, is exploding, both for consumers and business users like data centers. We have been deeply engaged with customers as we develop this business plan, and we continue to engage them in specific contracts for our 20 gigawatt hour capacity in 2027 and beyond. I would say this is not at the pace of auto industry. We can build the factories faster than auto, and we can scale our revenue much faster. We also have a significant advantage technology-wise. We have access, working with CATL and licensing their technology, but in our own plants.
Sure it's early days.
Um, but
At the strategy level, there is no doubt.
That's the growth for battery storage for both data center buildout and grid stability.
Places like California, Texas. Florida is exploding.
Both for consumers and business users, like data sets.
We have been deeply engaged with customers as we developed this business plan, and we continue to engage them in specific contracts. For our SI 6, for our 20 gigawatt-hour capacity in '27 and beyond,
I would say this is not a, um, this is not at the pace of the auto industry. We can build the factories faster than auto, and we can scale our revenue much faster.
We also have a significant Advantage technology wise.
Jim Farley: We have a significant advantage with the LFP technology compared to our competitors, who are either importing with high tariffs, LFP, or trying to run this business with lithium batteries, and much higher costs locally made. We believe that Ford has the manufacturing expertise to scale this business. We have great partners that can help us, and we're really excited to be a customer-facing business. We don't want to be a contract manufacturer of batteries. We want to have end-to-end solutions for customers, where Ford Energy people will be calling, fulfilling, not just the sales contracts, but servicing those customers over the long term. We believe this is a great adjacency for our Pro business. It fits right in the wheelhouse of our expertise, and given our advantage technologically, maybe for a period of time before battery costs commoditize, we feel like the customers are very excited.
We have access, working with CATL and licensing, you know, technology. But in our own plants, we have a significant advantage with the LFP technology compared to our competitors, through either importing—with high tariffs—LFP, or trying to run this business with lithium batteries.
And much higher costs locally made.
Um, we believe that Ford has the manufacturing expertise to scale this business. We have great partners that can help us.
And we're really excited to be a customer-facing business. We don't want to be a contract manufacturer of batteries. We want to have end-to-end solutions for customers, where Ford Energi people will be calling to fill in, not just the sales contracts, but servicing those customers over the long term. We believe this is a great adjacency for our Pro business; it fits right in the wheelhouse of our expertise and, given our
Jim Farley: When we come calling to large grid suppliers, energy companies, they're really excited about Ford being in this business. We're a trusted company. They've been buying our vehicles for a long time, and we've done our homework on this business.
Andrew Percoco: Great. Yeah, that makes a lot of sense. And maybe just to follow up with another question on capital allocation. I mean, Jim, I think you've been a pretty big advocate of partnerships in the past, where it makes sense. So, when it comes to your autonomy strategy, it sounds like you're trying to do a lot of that yourselves in-house. Can you maybe just elaborate on why that's the right decision-
When we come calling to large grid suppliers, energy companies, they're really excited about being in this business. We're a trusted company. Uh, they've been buying our vehicles for a long time, and we've done our homework on this business.
Jim Farley: Sure.
Andrew Percoco: Why a partnership doesn't make sense in this context? Thank you.
Thank you.
Jim Farley: Good, good question. You know, BlueCruise is largely a supplier-based system that Ford basically perfected the customer experience. But level three is quite different. It's a very important safety-critical system, where people are traveling in high speed on the highways with their eyes off, and we have real expertise coming from Argo. The people that we got out of the Argo team that are now in Latitude are very experienced people. And we don't think the technology is exclusive. What we think why we want to bring this in-house is two reasons: affordability. These are very expensive hardware solutions and software. By bringing them inside the company, we can save thousands of dollars per vehicle in cost. That's why we're launching L3 with a UEV. Many of our competitors are launching level three with their luxury brands.
Good, good question. You know, blue cruise is largely some higher based system. That Ford basically perfected, uh, the customer experience. The level 3 is quite different
It's a, it's a very important safety critical system where people are traveling in high speed on the highways with their eyes off.
And we have real expertise coming from Argo. The people that we got out of the Argo team and that are now in Latitude are very experienced people and
Uh, we don't think the technology is exclusive, we think.
Jim Farley: We're going to be doing it with our $30,000- to $35,000-dollar vehicles. That's a big strategy choice by Ford. We can do that because we did this inside the company, and we had control over the hardware, and it wasn't supplier-based, so it was more affordable. The second thing is experience. When you're driving down the highway with your eyes off the road, it's very important to have safety-critical systems when the vehicle reengages the customer, how that whole process works, and all the content sharing and all the other activities the customers can be doing and not driving the car. So it's very important for us to control and curate the experience on level three. Level four strategy could be quite different. I'm not going to go into that today, but I think we look at level three quite differently than level...
Why we want to bring this in houses 2 Reasons affordability these are very expensive Hardware Solutions and software by bringing them inside. The company, we can save thousands of dollars per vehicle in cost. That's why we're launching L3 with the UAV. Many of our competitors is launching level 3 with their luxury Brands. We're going to be doing it with our 30 to 35,000 viewers. That's a big strategy, um, Choice by 4 we can do that because we did this inside the company and we had control over the hardware and it wasn't supplier based. So it was more affordable. The second thing is the experience when you're driving down the highway with your eyes off the road, it's very important to have safety critical systems when the vehicle re-engages with the customer how that whole process works and all the content sharing and all the other activities that the customer is going to be doing and not driving.
Jim Farley: Level 4, quite differently than level 3 autonomy.
So it's very important for us to control and curate the experience on Level 3. Level 4 strategy could be quite different. I'm not going to go into that today, but I think we look at Level 3 quite differently.
Andrew Percoco: That's super helpful. Thanks so much.
Than level 4 quite differently than level 3 upon.
Jim Farley: Thank you.
That's super helpful. Thanks so much.
Operator: Your next question will come from Mark Delaney with Goldman Sachs.
Thank you.
Mark Delaney: Yes, good afternoon, and thank you very much for taking the questions. So I'm going to talk first on costs. You talked about $1.5 billion of progress this past year, excluding tariffs, and expecting another $1 billion in 2026. If we go back to the 2023 Investor Day, you talked about a $7 billion relative cost gap with peers, and I'm curious with the progress Ford has seen, where you think you are on that journey, and is $7 billion still the right number for investors to have in mind over time?
Your next question will come from Mark Delaney with Goldman Sachs.
Yes. Good afternoon. Thank you very much for taking the questions. Uh, I was hoping to, uh, talk first on costs. Uh, you talked about $1.5 billion of progress this past year, excluding tariffs, and expecting another $1 billion in 2026. If we go back to the '23 Investor Day, you talked about a $7 billion relative cost gap with peers. I'm curious, with the progress Ford is seeing, where do you think you are on that journey, and is $7 billion still the right number for investors to have in mind over time?
Andrew Frick: So you're absolutely right. The $1.5 billion last year, another $1 billion this year, most of it from material as well as warranty. Obviously, we refresh the cost gap scenarios as all the earnings come out. We will redo that, but firmly believe that we're closing that gap quite rapidly.
So you're absolutely right. We had $1.5 billion last year, another $1 billion this year, most of it from material as well as warranty.
And, uh, obviously, we refresh the U.
Jim Farley: I just want to highlight the important work that Kumar and Doug are doing on the next-generation product. We're launching high-volume, very meaningful products in the next couple of years, and embedded in those products is much lower cost. So not only are we doing it kind of year to year through BOM adjustments, negotiation with our suppliers, lower freight and duty, and lower labor content in our plants, we're also embedding that, all that thinking into our next generation of products. And to me, that is the ultimate work together because that will change the culture of the company.
Uh, the cost gap scenario is—as all the earnings come out. We will redo that, but we firmly believe that we're closing that gap quite rapidly.
I just want to highlight the important work that Kumar and Doug are doing on the Next Generation product.
We're launching high volume, very meaningful products in the next couple years. And embedded in those products is much lower cost.
So not only are we doing it kind of year to year through BOM, adjustments, negotiation with our suppliers, lower freight duty, lower labor content, and our plans. We're also embedding all that thinking into our next generation of products, and to me, that is the ultimate work together, because that will change the culture of the company.
Mark Delaney: Helpful. Thank you for those comments. My other question was around inventory. You mentioned exiting 2025 at the low end of your inventory target, obviously facing some challenges around supply chain. But as you think about what's assumed in your 2026 guidance and making up for a degree of the lost volume from this past year, are you assuming you restock dealers as part of your outlook for this year, or are you planning to ship to demand? And, you know, I ask in part to try and understand around, you know, the extra shift of F-Series production. Is that something that might be sustainable into 2027? Thanks.
Andrew Frick: Yeah, good question. We ended the year on the low end of our range. You know, we reduced our stocks dramatically year to year, leaving 25. So we were down 16%. We had about a 66 gross day supply. We expect in 2026 to remain within our targeted levels of the 55 to 65 retail base supply for the year. We will be on the lower end of our F-150s for the first half of the year as we rebuild in the second half of the year. But we'll stay within our overall range, and we have... You know, combined with that is the demand side of the business. So that will allow us to do that, especially in our truck business.
How far, thank you for those comments. My other question was around inventory. You mentioned exiting 25 at the low end of your inventory. Target obviously facing some challenges around supply chain, but I think about what, assumed in your 20 Sky ends and, and then making it up for a degree of the loss of volume from. From this past year, are are, are you assuming you restock dealers? As, as part of your, your outlook for this year? Or are you planning to, uh, to, to ship to demand? And, you know, I asked in part to try and understand around, you know, the extra, um, shift of of that series production? Is that something that might be sustainable? Uh into 2027? Thanks.
Mark Delaney: Thank you.
Yeah, good question. Um, we ended the year on the low end of our range. Uh, you know, we we reduced our stocks, um, dramatically year to year, leaving 25. So, we were down 16%, we had about a 66 first day supply, we expect in 26 to remain within our targeted, levels of the 55 to 65 retail day supply for the year. Um, we will be on the lower end of our F-150s. Um, for the first half of the year as we rebuild in the second half of the year. Um, but we'll stay within our overall range and, and we have, you know, combined with that is the demand side of the business. So that will allow us to do that, especially in our, our truck business.
Thank you.
Operator: Your final question will come from Colin Langan with Wells Fargo.
Colin Langan: Oh, great! Thanks for taking my questions. Just to clarify on the volumes, I think you originally said, you know, you lost 90,000. You were gonna add capacity of 50. Sounds like, is that still the case that we should see about a 140,000-ish increase, or I think your comments seem to imply that maybe it's a little lower than that? Any color there on the actual volume recovery we should expect?
Your final question will come from Colin Langan with Wells Fargo.
Just to clarify on developments. I think you originally said you know, you lost 90,000 you were going to add capacity of 50. Sounds like is is that still the case that we should see about 140,000 ish increase or I think your comments seem to imply that maybe it's a little lower than that. Um any any color there on the actual volume recovery? We should expect.
Andrew Percoco: Yes. So we had lost around 100,000 units last year. We're planning to increase by about 50 to 60 this year. It's the plan.
Yes. So, we um, had lost around 100,000 units last year. We're planning to increase about 50 to 60 thousand this year.
It's the plan.
Colin Langan: ... Okay, because I thought you originally said you expected $1 billion, and now it's $500 million to $1 billion. So is that just the added cost to get the-- that's what's worse than you originally thought in Q3, is the added cost to get that aluminum over?
Sherry House: Well, the added cost is definitely a factor, and that came after the second fire in November. So the added cost is different than when we had reported after the first fire.
Okay, because I thought you originally said you expected a billion, and now it's $500 million to a billion. So is that just the added cost to get the—that's what's worse—when you originally thought in Q3. Is the added cost to get that aluminum over?
Colin Langan: Okay. And then if I look at the Free Cash Flow guide, it's up $2 billion at the midpoint. Adjusted EBIT's up $2 billion, but CapEx is up over $1 billion. What's the additional $1 billion sort of help to Free Cash Flow to kind of keep the adjusted up $2 billion without the CapEx being higher?
Well, the added cost is definitely a factor, and that came after the second fire in November. So the added cost is different than when we had reported after the first fire.
okay, and then if I look at the free cash flow guide, it's up to billion at the midpoint
Adjusted, if it's up to a billion, but capex is up over a billion. What's the additional billion? Sort of helped the free cash flow to kind of keep the adjusted up to $2 billion, without the capex being our—
Sherry House: Yes. So we had... You're talking about the cash flow from 3.5 this year to the midpoint, which would be at 5.5 in 2026, right? So that's going to be driven by higher automotive EBIT that's going to be driving with your free cash flow conversion. We also had a receivable from the US government for $1 billion in tariffs, and we do have, as you said, higher capital spending in 2026 as we moved into these higher growth opportunities.
Yes. So we had, um,
You're talking about the the cash flow from 3 and a half this year to to the midpoint which would be at 5 and a half in 2026, right? So that's going to be driven by higher Automotive e bit. That's going to be driving with your free cash flow conversion. Um, we also had a receivable um from the US government for a billion dollars in tariffs
And we do have, as you said, higher capital spending in '26 as we move into these higher growth opportunities.
Colin Langan: Got it. Okay. So the receivable from the government. Okay. All right. Thank you very much for taking my questions.
Sherry House: You're welcome.
Got it. Okay, so the receivable from the government. Okay? All right. Thank you very much for taking my questions.
Jim Farley: This concludes the Ford Motor Company Q4 2025 earnings conference call. Thank you for your participation. You may now disconnect.
You're welcome, this includes.
This concludes the Ford Motor Company fourth quarter 2025 earnings conference call. Thank you for your participation. You may now disconnect.
