Ford Emphasizes Commercial Strength in Europe Amid Policy Risks, Echoing Broader EV Reset Challenges

What happened

Ford is facing significant policy risks in Europe that threaten passenger car profits, as highlighted in recent analysis. To counter this, the company is betting on its Ford Pro commercial segment and platform tie-ups to shore up margins, a strategy underscored in the new article. This aligns with the DeepValue report's thesis that Ford relies on truck and commercial profits to fund a multi-year EV reset while managing volatility. However, the report reveals a weakening core engine, with adjusted EBIT excluding Ford Credit declining and warranty accruals elevated at $17.2 billion. Additionally, Ford must navigate temporary $1.5B–$2.0B cost headwinds from tariffs and aluminum sourcing, critical for its 2026 financial targets.

Implication

Ford's focus on Europe margins through Ford Pro and partnerships is a tactical response to policy risks, but it doesn't address core issues like EV losses and declining profitability. The investment thesis remains fragile, with policy risks adding to existing volatility from tariffs, quality costs, and a high debt load. Upside depends on proving that temporary costs disappear in 2027 and that Model e losses narrow as guided, without which the stock lacks a margin of safety. Given the 'WAIT' rating and reliance on uncertain execution, investors should avoid new positions until 1H26 disclosures validate cost normalization and warranty trends. This cautious approach aligns with the need for evidence before underwriting returns in a volatile environment.

Thesis delta

The article adds specificity to Europe's policy risks and Ford's reliance on commercial strength, reinforcing the existing thesis that truck/commercial profits are critical amid challenges. However, it does not alter the core investment call, which remains dependent on cost roll-off and EV reset execution, with no material shift in valuation or timeline. Vigilance on regional developments is warranted, but the thesis stays unchanged pending clearer evidence from upcoming disclosures.