Today Ford announced an $8.7 billion loss for the quarter. One might wonder how Ford, GM, and Chrysler have fallen so far so fast. None of the press coverage mentions what is likely the root cause of the precipitous decline: the 25 percent tariff that the U.S. imposes on “light trucks” (search for “light truck tariff” in Google News and you will see how sparse the coverage is). Imported cars are taxed at 2.5 percent. Imported SUVs, minivans, and pickup trucks are taxed at 25 percent. Domestic auto manufacturers are forced to compete on the world market when they make cars. They lose money on nearly every car that they make. Domestic manufacturers have a built-in 25 percent profit if they can make a pickup truck at the same price as someone in Japan, Eastern Europe, or China. Ford and GM make money on pickup trucks, though only at the expense of American consumers who pay 25 percent more for their gas guzzlers than they should.
American consumers have finally decided that they don’t need to pay a 25-percent premium for vehicles that are not efficient means of personal transportation and hence the collapse in profits and share price. Without the tariff walls it is not clear that the U.S. operations of Ford and GM, considering their union contracts and pension/health care liabilities, have any value at all.