Ford: S&P Conversation Highlights
Todd Duvick, CFA - Head of Autos, CreditSights
Will Lee - Analyst, Autos, CreditSights
19 September 2025
Insights into Ford: S&P Conversation Highlights, including:
- Automotive Profit Margin Trajectory: Understand how S&P’s Ford Credit Rating Outlook prioritizes margin direction over exact numbers, with projections showing recovery from 4.5%-5.0% in 2025 to 7.5%-8.0% by 2027 despite falling below the 8% downgrade threshold.
- Regulatory Cost Relief Impact: Discover how relaxed US and EU emissions standards could reduce Ford’s regulatory compliance burden by up to 60 basis points starting in 2026, significantly lowering the previously expected multi-billion-dollar cost impact.
- Warranty and EV Profitability Focus: Learn how Ford’s improving initial quality metrics and transition to over-the-air fixes—95% less costly than physical repairs—are expected to reduce warranty costs and narrow the 300 bp Model e margin drag through next-generation EVs launching in 2027.
- Tariff Mitigation Strategy: See how Ford’s heavy US manufacturing base provides a competitive advantage with lower tariff exposure versus peers, while disciplined pricing on profitable SUVs and pickups could drive market share gains as competitors raise prices.
- BBB- Rating Stability Factors: Gauge the key factors supporting Ford’s negative outlook rather than immediate downgrade, including cost reduction targets of $1.0 billion for 2026 and S&P’s view of a credible path back to the 8% EBITDA margin threshold by 2027-2028.
Executive Summary
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In this report, we highlight key takeaways from our September 17, 2025, conversation with S&P rating analyst Nishit Madlani regarding Ford’s credit rating and outlook.
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Automotive profit margin direction is more important than the exact number.
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Warranty costs and Model e profit improvement are areas of focus.
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Lower emissions regulatory costs should reduce Ford’s margin headwind.
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Disciplined new vehicle pricing is expected to help mitigate tariffs.
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Tariffs will challenge Ford’s cost reduction mettle but could support share gains.
Automotive profit margin direction is more important than the exact number
S&P affirmed Ford’s BBB- long-term issuer credit rating on February 6, 2025, but revised the outlook to negative from stable. The outlook revision reflected the agency’s expectation that Ford’s automotive EBITDA margin would fall below 7% in 2025, below the 8% S&P downgrade threshold, before approaching 8% in 2026. S&P lowered its expectation for Ford’s 2025 automotive profit margin to 6%-8% in May related to tariff cost headwinds, and in July to 4.5%-5.0% on tariff and ongoing warranty costs. The agency now expects Ford’s automotive profit margin to improve to 6.5%-7.0% in 2026 and 7.5%-8.0% in 2027.
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