MARY LOUISE KELLY, HOST:
Are Americans about to pay higher prices for cars? That has been a question on the minds of both ordinary folks who buy cars and the folks who make them. Well now comes news that President Trump will ease tariffs on American automakers to give them more time to relocate production to the U.S. But the tariffs are not going away, and there are still a lot of questions about what impact they will have - questions we are going to put now to the CEO of Ford, Jim Farley. He's on the line from Ford's Kentucky Truck Plant. Welcome, Mr. Farley. This is Louisville, where you're speaking with us from?
JIM FARLEY: You got it. This is our biggest, most important truck plant in the world for Ford.
KELLY: OK. Well, I want to ask you more about the plant in a second, but let's just go straight to the news of President Trump saying he will walk back some tariffs. You put out a statement welcoming the move. Just briefly explain why.
FARLEY: Well, Ford is a mostly American company. We make 80% of what we sell in the U.S. here, and so the tariffs for us are a bit different than the industry. The U.S. industry is about 17 million units, and 8 million of that - about half - are imported through ports around the country. And half is built in the U.S. So the tariffs will have a really big impact on our industry because 25% cost increase for 50% of the vehicles sold in America.
KELLY: So you're saying Ford already makes 80% of your cars in the U.S. That's more than any other...
FARLEY: Yeah.
KELLY: ...U.S. automaker. I want to ask about the parts, though...
FARLEY: Yes.
KELLY: ...Because a lot of the parts you use to build those cars do come from other countries - Mexico and so on. Will you be shifting to U.S.-based suppliers?
FARLEY: Well, on average, our localization of the parts, as you said, is around 75%. That's either USMCA-compliant parts coming from Mexico or Canada. During Trump 1, we negotiated USMCA, where even a part made in Mexico could have a lot of U.S. content in it. So the 75% I mentioned - visualize an F-150 - 75% of the parts either come from the U.S. - about half - and the rest are coming from those other countries, but they have a lot of U.S. content as part of that.
KELLY: But I guess the central question here - if the administration's stated goal with easing these tariffs for now is to give automakers like you time to shift production, how do you decide whether or not to do so when the tariffs themselves are a moving target, when President Trump may change his mind again in two days?
FARLEY: So what the Trump administration did yesterday to make it simple is they gave all the automakers - Ford's in a different spot, as I said - about a 15% leeway on parts that are non-USMCA or non-U.S. So they're giving us kind of an exemption for carpets, washers, fasteners, wiring looms, stuff that, honestly, we can't even get in the U.S. and also stuff that, frankly, if we made here, it would make the car a couple thousand dollars more expensive, which is too expensive for what we think, so...
KELLY: So does that stuff stay overseas? You'll continue getting that from overseas?
FARLEY: No. I mean, we'll continue to do the math and aggressively move localization. But the one thing we have to balance is affordability. The F-150 is $800 a month already, and it's America's best-selling vehicle. Do we want to make that $850 a month? You know, and that's the balance between affordability and making 100% of the parts here or, you know, keeping it as is.
KELLY: I nodded to the big question on a lot of ordinary Americans' minds - are the prices of our cars about to go up? Will prices still have to go up, even with this - at least for now - scaling back of some of the tariffs?
FARLEY: I think it's inconceivable to say that car prices won't go up. Why? Fifty percent of all vehicles bought by Americans are imported, and those imported cars will get a 25% tariff now. That is literally 5- to $10,000 a vehicle. So for the importers - and actually, some of those companies are local companies and, you know, some of our competitors that are domiciled in the U.S. - and they have big decisions to make because their tariff bill will be very large compared to Ford.
KELLY: And how about it for you at Ford?
FARLEY: We only import about 10%, something like that. And so, for us, we have 6- to 10% margins. Twenty-five percent tariff on the parts that we don't build in here - like, 20% of our vehicles - you know, is billions. But we can offset that, and it depends how our competitors act. Will the overseas importers, you know, increase prices and allow us to gain market share and therefore, you know, build even more here and be able to more than offset that in terms of the price that we would have to take? I don't know. It will all come down to this summer, when those increased prices may or may not happen, and Ford deciding, what do we do...
KELLY: Yeah.
FARLEY: ...About that competitive dynamic?
KELLY: So I'm trying to pin you down on this. If the basic question is, are Ford prices going to go up, it sounds like the answer is, we don't quite know yet because there's so much uncertainty in your industry.
FARLEY: I would say that's the right answer. You know, we announce today, actually - I can announce it right now - that we're extending employee pricing through July 4. We want to enter this period of uncertainty by reassuring Americans, if you buy a Ford, you don't have to worry about that, at least through July 4.
KELLY: And, I mean, I can hear the factory floor and the supply line behind you. Just paint me a picture of...
FARLEY: Yeah.
KELLY: ...A year from now, how different things might look. Because I'm wondering, you know, if you're looking at, for example, jobs - another stated goal of these tariffs is to provide jobs for American workers - won't a lot of the work, say, at the Kentucky plant where you are speaking with us from already be automated, be robots, be AI?
FARLEY: A year from now, I don't know what's going to happen, but I will know what's happening at Ford. We're building two brand-new plants for - expand our hybrid and electric lineup. I think that Ford, because of the tariffs - we're in the best position. For many years, we built 80% in the U.S., and we had much higher costs than our competitors importing overseas. Well, that will start to change now. And I believe, in Ford's case, this is a pretty big opportunity for us.
KELLY: Last thing, Mr. Farley, I know that you have spoken directly to the president about these tariffs. What did you learn from those conversations?
FARLEY: Well, what I've learned is that I think he is very committed to building more jobs like these in America. I mean, these are the best of the best, you know, hourly jobs you can find in America. He's very committed to that. But I think, you know, the issue that we all have to work through together is, how fast can that change? And what will be the pricing and the affordability that we can manage through that transition?
KELLY: Would more predictability be useful for your business?
FARLEY: Well, sure. Cost increases are not great for any industrial company. On the other hand, we have committed to the U.S. We want to expand jobs in the U.S. And so it's a balancing act between affordability and these great jobs. And I think I would just say there's no quick answer here. This is a long-term policy change, and we have to work together through it, even the most American companies like Ford.
KELLY: Jim Farley is president and CEO of Ford, joining us there from the Ford Kentucky Truck Plant in Louisville. Jim Farley, thank you.
FARLEY: Thank you.
KELLY: And a point of clarification - Jim Farley said about half of the F-150's parts come from the U.S. According to Ford, it's actually closer to 60%.
(SOUNDBITE OF KATZROAR'S "POMEGRANATE SEEDS") Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
