Ford Motor Co is canceling plans to import a new crossover model from a plant in China after US tariffs undermined the business case for bringing the vehicle to the US market.
US President Donald Trump’s move in July to place an additional 25 percent levy on China-built vehicles undermined the profitability of the Focus Active that Ford planned to start shipping to the US about a year from now, said Kumar Galhotra, president of Ford’s North American operations.
The company said it was not worth investing more money in a vehicle that would have had fewer than 50,000 unit sales a year in the US.
“Our viewpoint on Focus Active was that, given the tariffs, obviously our costs would be substantially higher,” Galhotra said in a conference call with reporters. “Our resources could be better deployed.”
Galhotra said Ford builds about 80 percent of the vehicles it sells in the US in its home market, while another 15 percent are assembled in Canada and Mexico. Most of the remainder of its deliveries are two imports from India and Spain: the EcoSport crossover and the Transit Connect van.
Pulling the plug on the Focus Active would not be hugely significant to Ford’s business, as it sells more than 2.5 million vehicles per year in its home market.
However, its cancelation could portend the first of several culling from automakers’ US lineups if Trump continues to escalate trade wars with the likes of China, Europe and even Canada.
For months, the US Department of Commerce has been investigating whether imported cars and components pose a threat to US national security, and the administration is said to be considering tariffs of as much as 25 percent.
Automakers have already been seeking refuge from Trump’s trade battle with China.
General Motors Co (GM) this month asked the administration to grant a tariff exemption to the Buick Envision sport utility vehicle it imports from the eastern province of Shandong.
Volvo Cars piggy-backed off GM’s request, asking that its similar-sized XC60 SUV also be immune from the levies, and Daimler AG has predicted significant financial fallout from the duties.
In June, the Mercedes-Benz maker cut its profit outlook for the year, citing in part its expectation that fewer Chinese consumers would buy Alabama-built SUVs as a result of Beijing’s retaliatory tariffs.
Moody’s Investors Service this week downgraded Ford’s credit rating to a step removed from “junk,” citing risks associated with a turnaround effort that chief executive officer Jim Hackett has warned could cost US$11 billion and take years.
While analysts have warned that the company’s dividend might need to be cut, senior executives have maintained that it is not at risk.
Last month, Ford’s stock dipped below US$10 for the first time in nearly six years. The shares dropped another 2.3 percent on Friday to US$9.48.
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