A handful of automakers are reporting some very solid first-quarter profit boosts, but it’s not because they magically started selling more cars at a time when the industry is slowing. Instead, they’re projecting what they’re expecting to get from future refunds of tariff payments they made to the U.S. government that were declared illegal by the Supreme Court. Of course, by taking these refunds, they risk angering President Donald Trump, but it’s a risk many are apparently willing to deal with.
Last week, companies that were hit with import duties began applying for refunds following a Supreme Court ruling back in February that struck down some of Trump’s tariffs. In total, up to $166 billion is set to be reimbursed to importers who paid tariffs, and the auto industry was one of the hardest hit. In total, automaker are expected to ask for about $2.3 billion in refunds. The process is expected to take several months. From Reuters:
Ford Motor told investors it is due to be reimbursed $1.3 billion that it paid under a 1977 law called the International Emergency Economic Powers Act, or IEEPA. General Motors anticipates recovering $500 million it paid in import taxes under that law. Mercedes-Benz also said it recorded an expected refund onto its first-quarter books.
The companies logged the estimated refunds for accounting purposes, which increased their quarterly bottom lines. They acknowledged, though, that they did not know when they would be refunded, given the uncertainty around the government’s process for doling out payments.
GM and Ford both said that because the money has not been received yet, they did not record the payments as free cash flow, and would only do so once it comes through the door.
On Thursday, Jeep-maker Stellantis booked a positive first-quarter impact of around 400 million euros ($467 million), based on expected refunds.
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Accounting firm Ernst & Young said in an advisory paper last month it was acceptable to book projected refunds when companies can assert their intent to recover payments and reasonably estimate the amount.
There’s a real risk that Trump, a notoriously vindictive man, could — in one way or another — punish automakers that apply to get their money back. In an interview last week with CNBC, he reportedly said he would “remember” companies that opted not to seek refunds. However, he didn’t go so far as to say how they may benefit.
Ford CFO Sherry House said on Wednesday that the company had a fiduciary duty to file a lawsuit to get reimbursed, “really just for purposes of protecting our shareholders and getting in line to be able to receive the reimbursement.”
[…]
Meanwhile, Trump’s tariffs are still inflicting pain. The levies charged under IEEPA were only a slice of the overall tariff regime affecting carmakers, which still face import taxes on steel and aluminium, cars and parts shipped from Mexico and Canada, and other levies.
[…]
GM said this week that tariffs would reduce its profits by $2.5 billion to $3.5 billion this year. Ford pegged its net tariff cost at $1 billion.
Back in February, Trump imposed a 10% tariff for 150 days under Section 122 of the Trade Act of 1974. He also launched investigations into excess industrial capacity in major trading partners and into forced labour.
It’s not totally clear how Trump will react to the government losing out on $166 billion, but I cannot imagine it will go over well.
