WSJ What’s News: What’s News in Earnings – How Car Companies Are Prepping for Tariffs

Released: May 7, 2025
Host: Julia Carpenter
Guest: Ryan Felton, Automotive Regulatory Specialist, The Wall Street Journal

Introduction

On the May 7th episode of WSJ's What’s News in Earnings, host Julia Carpenter delves into the automotive industry's latest challenges and strategic responses amidst the ongoing imposition of tariffs by the Trump administration. The episode features insights from Ryan Felton, who specializes in automotive regulatory issues and covers companies like Stellantis.

Impact of Tariffs on Major Automakers

Executive Responses to Tariffs

Ryan Felton opens the discussion by describing the automakers' primary strategy as "hedging" against the uncertain tariff landscape (01:36). He explains that leading companies such as Ford, General Motors (GM), Stellantis, and Tesla have revised their forecasts downward, anticipating additional costs running into billions of dollars. These costs are attributed to both the tariffs themselves and efforts to restructure production to minimize tariff liabilities.

General Motors' Strategic Adjustments

GM has projected tariff-related costs between $4 billion and $5 billion for the year, potentially reducing its net profit by up to 25% (02:08). In response, GM plans to:

• Cut Spending: Streamlining expenses in various departments.
• Increase Production: Focusing on more profitable sectors, such as pickup trucks, by expanding production at their Indiana factory.
• Shift to Electric Vehicles: Investing in U.S.-based battery production.

Felton notes that GM’s efforts are also influenced by discussions with the United Auto Workers, highlighting the company's existing capacity to boost production without significant workforce expansions (02:25).

Stellantis in Transition

Stellantis faces its own set of challenges, primarily the search for a new CEO after the previous executive's departure last year (03:04). Felton highlights that Stellantis is on track to name a new CEO by the end of the first half of the year. Additionally, the company is grappling with:

• Production Relocation: Shifting the manufacturing of profitable pickups from Mexico to potentially more tariff-friendly locations.
• Cost Reduction: Identifying areas to trim expenses without compromising on output.
• Factory Reopening: Plans to reopen a factory in Illinois, acknowledging the complexities and time required for such actions (03:56).

Broader Implications for Consumers

Felton emphasizes the significant impact of tariffs on consumers, noting that cars are the second-most significant purchase for most individuals (04:05). He points out that the increased costs may lead to higher car prices in the future. However, companies have been proactive in offering promotions to sustain sales momentum before potential price hikes take effect (04:38).

Tesla's Financial Struggles and Future Plans

Tesla reported a staggering 71% drop in net income for the most recent quarter, marking some of its weakest results in years (04:38). Felton attributes the decline to:

• Elon Musk’s Shift in Focus: Musk is dedicating more time to engagements with the White House, impacting Tesla's operational focus (05:00).
• Product Line Concerns: There’s growing sentiment that Tesla's stagnation in introducing new models has dampened consumer interest.

In response, Tesla plans to launch an updated Model Y SUV and is exploring the introduction of more affordable models, potentially a more stripped-down version of the Model Y and Model 3, to rejuvenate consumer interest (05:49).

Supply Chain Disruptions

Supply chain stability remains a critical concern. Felton draws parallels to the semiconductor crisis, explaining that ongoing negotiations between automakers and the government over tariff responsibilities are precarious (06:08). He warns that breakdowns in these negotiations could lead to significant supply chain hiccups, as a single supplier's failure can disrupt the entire manufacturing process due to the specialized nature of automotive components (06:53).

Potential Pass-Through of Tariffs to Consumers

When asked about the likelihood of tariffs being passed on to consumers, Felton notes that, currently, automakers are not raising prices, leveraging approximately two months of unsold inventory to navigate the situation (07:07). Additionally, recent changes, such as the exemption of many auto parts within the North American region from tariffs, may mitigate some of the financial burdens. However, companies heavily reliant on imported components, like Subaru and Volvo, could face more immediate challenges and consumer price impacts (07:07).

Conclusion

The episode wraps up with Julia Carpenter summarizing the key points discussed, highlighting the strategic maneuvers of major automakers in response to tariffs and the broader implications for the automotive market and consumers. The insights provided by Ryan Felton offer a comprehensive overview of the current state and future outlook of the automotive industry amidst regulatory and economic pressures.

Produced by Charlie Duffield and Pierre Bienname with Deputy Editor Chris Sinceley.

For more updates, stay tuned to What’s News in Earnings by The Wall Street Journal.