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Cost and chaos continue to test resiliency of U.S. auto industry
A worker at Ford’s Kentucky Truck Plant on April 30, 2025.
Michael Wayland | CNBC
DETROIT — “A lot of cost and a lot of chaos.” That’s how Ford Motor CEO Jim Farley described the state of the automotive industry earlier this year amid geopolitical tensions, tariffs, inflation and other disruptions.
All those factors created massive uncertainty for the U.S. automotive industry that led to relatively bearish outlooks for the sector in 2025. Some of those concerns have come to fruition, but the industry has proven to be far more resilient than many had expected.
“Six months into the onset of tariffs, we’ve been positively surprised by the extent to which the industry has held in better than anticipated,” Barclays analyst Dan Levy said in an investor note last month that upgraded the U.S. auto/mobility sector to neutral from negative.
The neutral rating by Barclays speaks volumes about the state of the automotive industry right now, according to auto executives, insiders and analysts who say circumstances aren’t as bad as they once feared — but also that they still aren’t as positive or certain as they could be.
S&P Global last week released a new report explaining how tariff burdens have eased, but noting that demand headwinds persist amid slowing disposable income growth, consumer pessimism and fluid trade policies. The government shutdown also adds uncertainty to the economic outlook, the firm said.
Jim Farley, President and CEO of Ford Motor Company, speaks at a Ford Pro Accelerate event on Sept. 30, 2025 in Detroit, Michigan.
Bill Pugliano | Getty Images
The cautiousness followed S&P revising its U.S. light vehicle sales estimates upward by about 2%, to 16.1 million vehicles for 2025, and to 15.3 million, up 200,000, in 2026.
Part of what’s driven the unexpected optimism has been industry sales and production holding up much better than expected, in addition to broader macroeconomics such as consumer spending being relatively stable.
“The [economic] outlook is getting better, and part of it is realizing that tariffs didn’t end the world, and that applies to the auto market as well,” Cox Automotive’s chief economist, Jonathan Smoke, told CNBC. “I think we can navigate it, and I’m holding on to that optimistic outlook.”
Such optimism will be tested as major automakers such as General Motors, Ford and Tesla begin announcing third-quarter results this week.
Each of the American automakers is expected to report double-digit declines in adjusted earnings per share but remain profitable on an adjusted basis, according to analyst estimates compiled by LSEG.
“We expect Q3 earnings that [are] generally in line to slightly above expectations. Industry production did come in better than expected,” Wolfe Research analyst Emmanuel Rosner said in an Oct. 10 investor note. “But as always there are nuances to consider.”
Balancing act
The automotive industry is in a bit of a balancing act.
Tariffs have cost automakers billions of dollars this year, but deregulation of fuel economy penalties, as well as corporate gains under the Trump administration’s “One Big Beautiful Bill Act,” are expected to help offset those costs, Ford’s Farley and others have said.
Meanwhile, there are red flags of stress in auto lending for lower credit buyers, including the recent bankruptcy of subprime auto lender Tricolor — but sales and pricing of new vehicles through the third quarter remained far better than many had expected.
“There’s some positives for next year, but there could also be some really bad negatives if there’s a freak out on tariffs or the consumer finally breaks down or whatnot,” Morningstar analyst David Whiston told CNBC. “But no one’s calling for a complete crash.”
Fronts of the GMC Sierra Denali,Tesla Cybertruck and Ford F-150 Lightning EVs (left to right).
Michael Wayland / CNBC
Whiston — who covers GM, Ford and several auto retailers and suppliers — characterized his outlook as “cautiously optimistic,” saying the significant industry concerns are countered by other bullish circumstances.
UBS analyst Joseph Spak agreed, noting a lot of challenges for automakers such as tariffs and losses on electric vehicles “have already been incorporated into 2025/2026 estimates,” he said in an investor note last month.
In addition to the economic and political concerns, the automotive industry faces significant changes in all-electric vehicle adoption that caused GM last week to pre-report $1.6 billion in special charges during the quarter related to its pullback in EVs.
Adding to this year’s “chaos,” especially for Ford, is a fire last month at aluminum supplier Novelis that is impacting vehicle production. Wall Street analysts estimate the fire to cost Ford between $500 million and $1 billion in operating income.
“The industry is in a lot of flux. It faces an array of challenges,” Elaine Buckberg, a senior fellow at Harvard University and former GM chief economist, said regarding tariffs, EVs and other issues. “The level of volatility they’ve faced over the last seven years or so is unlike what came before.”
Suppliers
The broader supplier industry remains a major potential concern for automakers, as it did to begin the year.
The automotive supplier industry is made up of thousands of companies — ranging from multibillion-dollar publicly traded corporations to “mom-and-pop shops” making one or two parts — that industry experts say cannot support many, if any, additional cost increases.
“The market has been under pressure. It’s fragile,” said Mike Jackson, executive director of strategy and research for vehicle supplier association MEMA. “Those suppliers that are flexible and agile have been able to reposition themselves to be successful despite the changes, despite the shifts.”
Autolite spark plugs at an auto parts store in Provo, Utah, on Monday, Sept. 29, 2025. First Brands Group Holdings has filed for Chapter 11 bankruptcy, capping weeks of turmoil sparked by creditor concern over the auto-suppliers use of opaque off-balance sheet financing.
George Frey | Bloomberg | Getty Images
Not all have been able to compete successfully. The bankruptcy of U.S. auto parts maker First Brands Group in late September heightened concerns on Wall Street about the health of the private credit market. First Brands had a web of complex debt agreements with a slew of lenders and investment funds globally.
JPMorgan Chase CEO Jamie Dimon last week called the bankruptcies of First Brands and Tricolor Holdings “early signs” of excess in corporate lending, while some Wall Street analysts have written them off as idiosyncratic.
Executives have said automakers, also known as OEMs, or original equipment manufacturers, have so far done their best to assist suppliers when needed and have not passed on added tariff costs to such companies, but it’s unclear how long that may last.
“Suppliers clearly are working as hard as they can with their customers to try and mitigate the impact, understating it’s an important issue to work through,” Jackson said. “That said, there have been a number of different cost pressures that we’ve seen that go beyond the tariffs. … It varies by customer, by OEM.”
Shares of many larger publicly traded suppliers, such as Aptiv, BorgWarner, Dana and Adient, are up double digits so far this year. Even Canada-based Magna International, which at one point was expected to be one of the companies most impacted by tariffs, is up roughly 7%.
Those gains are despite the third quarter marking the 14th consecutive quarter of building pessimism by North American auto supplier executives, according to MEMA’s most recent “Vehicle Supplier Barometer” released earlier this month.
Adding to supplier concerns are continuing issues with tariffs between the U.S. with Mexico and Canada as well as the Trump administration’s ongoing trade war with China, where many rare earth materials, some of which are used in vehicles, are processed and sourced.
K-shaped concerns
There are also continuing concerns that the automotive industry is an example of a “K-shaped” economy in the U.S., where the wealthy keep seeing gains while those who have lower incomes struggle.
Economists have warned the U.S. economy is increasingly K-shaped following the coronavirus pandemic, with consumers experiencing different realities depending on their income level.
Used vehicle retailer CarMax was the first major auto-related company to sound the alarm on the consumer late last month.
“The consumer has been distressed for a little while. I think there’s some angst,” CarMax CEO Bill Nash told analysts earlier this month, with an auto lending executive for the used car retailer warning the “cracks” are “an industry issue.”
But that “issue” appears to only be for lower-income consumers or those with subprime credit, many of whom are not new car buyers.
Wealthier Americans have been assisted by rising house values, lucrative stock market returns and favorable credit, while lower- and middle-income buyers have faced tighter budgets and have been hit hard by rising inflation.
Fitch Ratings reports 6.43% of subprime auto loans in August were at least 60 days past due, in line with a record high of 6.45% that was hit in January. Delinquency rates for borrowers with higher scores have remained relatively stable.
“Clearly there is concern about the consumer, because if you’re not in the upper part of the ‘K’ then yes, there is stress,” Cox Automotive’s Smoke said. “But it tends to be a demographic story about median and below income households.”
About two-thirds of new vehicle purchases are made by people whose household income is above the median, according to Buckberg. The U.S. household median income last year was $83,730, according to U.S. Census Bureau estimates
That percentage could continue to grow and impact sales if tariff costs begin getting passed on to new car buyers or the whiplashing regulatory chaos barrels more into the automotive industry.
“That’s really the big question for 2026. I think everyone in the industry is assuming consumers are going to start to get tariffs passed down to them for autos. They haven’t really yet,” Whiston said. “How does the consumer react to that? Will they just take it in stride, pay more and keep going? Or will it just cause a massive freak out? No one knows the answer to that yet.”
Stocks fell sharply while the bond market creaked amid ongoing tension and increased rhetoric over the future of Greenland.
The FTSE 100 index closed down 68.57 points, 0.7%, at 10,126.78 on Tuesday.
The FTSE 250 ended 153.94 points lower, 0.7%, at 22,957.87, and the AIM All-Share closed down 2.35 points, 0.3%, at 801.14.
The threat of tariffs from US President Donald Trump continued to weigh heavy on European markets, while screens on Wall Street were a sea of red as trading resumed following Monday’s public holiday.
In European equities on Tuesday, the CAC 40 in Paris closed down 0.6%, while the DAX 40 in Frankfurt ended 1.0% lower.
In New York, financial markets were lower at the time of the London equity market close.
The Dow Jones Industrial Average was down 1.3%, the S&P 500 was 1.4% lower and the Nasdaq Composite faltered 1.5%.
Mr Trump said at the weekend that, from February 1, Britain, Denmark, Finland, France, Germany, the Netherlands, Norway and Sweden would be subject to a 10% tariff on all goods sent to the US until Denmark agrees to cede Greenland.
The announcement drew angry charges from US allies who are pondering countermeasures.
“Trade concerns are now front and centre, with European leaders pushing back against Washington’s stance and reportedly discussing countermeasures,” said David Morrison, senior market analyst, at Trade Nation.
“The potential use of the EU’s Anti-Coercion Instrument has added to market unease, particularly for export-heavy sectors such as autos and luxury goods, which have already come under pressure.”
Mr Morrison pointed to apparent split over how Europe should respond to Mr Trump’s threats.
“While UK Prime Minister Starmer pursues a softly-softly approach, insisting that jaw-jaw is better than war-war, French President (Emmanuel) Macron favours a more aggressive approach and wants to fight US tariffs with European ones,” he said.
European Commission president Ursula von der Leyen cautioned that Mr Trump risked plunging US ties with the EU into a “downward spiral”.
While Mr Macron warned against US attempts to “subordinate Europe”, and blasted as “unacceptable” Mr Trump’s threats to impose tariffs of up to 25% on countries opposed to his Greenland plans.
Reports suggested Europe could consider retaliatory tariffs and also possibly a concerted strategy to offload US treasury bonds.
The yield on the US 10-year treasury was quoted at 4.28%, widening from 4.21% on Friday.
The yield on the US 30-year treasury was quoted at 4.91%, stretched from 4.82% on Friday.
The focus now switches to Davos, which Mr Trump is due to address on Wednesday.
“Escalation or softening in tone seems likely to set the direction for European risk assets in the days ahead,” said Mr Morrison.
Adding to the bond market angst was a sharp sell-off in Japan.
Kathleen Brooks at XTB Research said while the sell off in long end bond yields was global, the biggest move “by far” was in Japan.
The 30-year Japanese bond yield rose 26 basis points, as investors “fret about an expansionary fiscal policy if PM (Sanae) Takaichi wins the February 8 election,” she pointed out.
“The Greenland issue is taking the headlines today, however, in the long term, the insane rise in Japanese bond yields could have a bigger global effect,” Ms Brooks suggested.
“Japan is central to global capital flows, if there is disruption in Japanese financial markets then this could have a knock-on effect on global capital flows and overall risk sentiment,” she added.
Ms Brooks said the risk is that the sell off in bonds causes “something to break, either a Japanese bank or fund gets into trouble like Silicon Valley Bank back in 2023, which is why it is worth watching the Japanese bond market as well as the Trump show this week.”
The pound was quoted higher at 1.3462 dollars at the time of the London equities close on Tuesday, compared to1.3428 dollars on Monday.
The euro stood at 1.1733 dollars, higher against 1.1643 dollars.
Against the yen, the dollar was trading at 157.95 yen, lower from 158.11 yen.
In London, analysts weighed data which pointed to a cooling labour market and a slowing in average wage growth.
According to the Office for National Statistics, the jobless rate was 5.1% in the three months to November, unchanged from the three months to October.
This came slightly above the FXStreet-cited market consensus, which had pencilled in a slight fall in unemployment to 5.0%.
The ONS said pay-rolled employees in the UK fell by 155,000, or 0.5%, on-year in November, and fell by 33,000, or 0.1%, on-month.
Annual growth in regular earnings, excluding bonuses, was 4.5% in the three months to November, slowing from 4.6% in the three months to October.
Annual average regular earnings growth was 7.9% for the public sector and 3.6% for the private sector.
“Today’s labour market data showed easing wage pressures, weak employment and rising redundancies. We judge this to be consistent with our view that the labour market continues to ease and has further to go in coming months,” said analysts at Barclays.
Informa led the blue chip risers, up 4.6%, after reporting “strong trading” in the fourth quarter.
The London-based events, digital services, and academic publishing business expects revenue of at least £4.0 billion in 2025, up 13% from £3.55 billion in 2024, representing underlying revenue growth of 6.3%.
On the FTSE 250, the weak labour statistics weighed on PageGroup, down 3.8%, and Hays, down 0.3%.
Morgan Stanley reiterated an ‘underweight’ stance on both recruitment firms and cut share price targets.
Elsewhere, Funding Circle jumped 14% as it reported stronger-than-expected revenue and profit growth in 2025, achieving its financial 2026 revenue target a year earlier.
The London-based lending platform focused on small and medium enterprises said revenue for the year was about £204 million, up 28% from a year earlier, beating market expectations of £191 million.
Profit before tax rose to around £20 million from £3 million in 2024, also ahead of consensus of £17 million.
Wise Group jumped 15% as analysts raised profit forecasts amid strong third quarter trading.
The London-based money transfer services provider expects full-year underlying income to be around the middle of its guided range of 15% and 20% growth, and expects underlying pre-tax profit margin for financial 2026 to be “towards the top” of the guided 13% to 16% target range.
JPMorgan analyst Craig McDowell said the underlying income forecast was better than consensus at 16.3%, while the underlying pre-tax profit margin projection was ahead of consensus at 14.3%.
McDowell predicted 9% to 12% pretax profit upgrades for financial 2026, while Bank of America was more bullish, raising numbers by 20%.
Brent oil traded higher at 64.89 dollars a barrel on Tuesday, down from 64.13 dollars late on Monday.
Gold was quoted at 4,742.56 dollars an ounce on Tuesday, up from 4,671.76 dollars on Monday.
The biggest risers on the FTSE 100 were Informa, up 39.8 pence at 912.2p, Haleon, up 11.8p at 372.9p, Endeavour Mining, up 112.0p at 4,208.0p, Rentokil Initial, up 8.0p at 461.7p and Melrose Industries, up 9.0p at 625.8p.
The biggest fallers on the FTSE 100 were Mondi, down 41.2p at 845.4p, Beazley, down 44.0p at 1,126.0p, Pershing Square Holdings, down 134.0p at 4,442.0p, Land Securities, down 19.0p at 635.0p and Bunzl, down 57.0p at 1,989.0p.
Wednesday’s global economic calendar has UK inflation figures and Canadian producer price inflation data.
Wednesday’s UK corporate calendar has trading statements from luxury goods manufacturer Burberry, sports retailer JD Sports, electrical retailer Currys and pub chain JD Wetherspoon.
– Contributed by Alliance News
Netflix has significantly increased its all-cash offer to acquire Warner Bros Discovery’s studio and streaming business, intensifying an ongoing takeover battle with rival Paramount Skydance.
The revised bid aims to secure Warner Bros’ extensive film and television library, alongside its premium HBO Max streaming service, in a move that could reshape the entertainment landscape.
In December, Netflix agreed to pay $23.25 in cash, $4.50 (£3.35) worth of Netflix stock per share to buy Warner Bros assets.
The deal valued the business at around $82.7bn (£61.5 bn). However, shares in Netflix have dropped by almost 15 per cent since the deal was first announced.
The US-based streaming giant has said it will now offer $27.75 (£20.64) per share in cash to buy the business, which will include Warner Bros’ extensive library of film and TV rights, as well as its HBO Max streaming service.
Analysts have said the new terms are favourable for investors in Warner Bros Discovery.
Despite the improved financial terms, Warner Bros Discovery continues to back Netflix over a competing bid from Paramount Skydance.
The rival studios and media giant had put forward an offer of $30 per share in cash, but crucially, this was for the entire Warner Bros Discovery company, rather than just its studio and streaming divisions, highlighting a key difference in the acquisition strategies.
David Zaslav, president and chief executive of Warner Bros Discovery, expressed his enthusiasm for the impending merger.
He stated: “Today’s revised merger agreement brings us even closer to combining two of the greatest storytelling companies in the world and with it even more people enjoying the entertainment they love to watch the most. By coming together with Netflix, we will combine the stories Warner Bros has told that have captured the world’s attention for more than a century and ensure audiences continue to enjoy them for generations to come.”
Greg Peters, Netflix’s co-chief executive, underscored the strategic and financial benefits of the amended agreement.
He commented: “By amending our agreement today, we are underscoring what we have believed all along: not only does our transaction provide superior stockholder value, it is also fundamentally pro-consumer, pro-innovation, pro-creator and pro-growth. Our revised all-cash agreement demonstrates our commitment to the transaction with Warner Bros and provides WBD stockholders with an accelerated process and the financial certainty of cash consideration, while maintaining our commitment to a healthy balance sheet and our solid investment grade ratings.”
The agreed deal is contingent on Warner Bros Discovery completing a proposed spin-off of its cable channels, which include CNN, TBS, and TNT Sports in the UK.
Last Updated:
India’s Index of Eight Core Industries rose 3.7 percent in December 2025, led by cement and steel growth, while oil and gas output declined.
Infrastructure-Linked Sectors Push Core Index Higher in December
India’s core industrial sectors showed stronger momentum in December 2025, with the Index of Eight Core Industries (ICI) rising 3.7 per cent year-on-year, according to provisional government data. This marks an improvement from November’s final growth rate of 2.1 per cent, signalling a mild recovery in key production segments.
The eight core industries together account for 40.27 per cent of the weight of the Index of Industrial Production (IIP), making them a crucial indicator of overall industrial health.
Cement, Steel Lead the Growth
Cement and steel emerged as the strongest performers in December. Cement production jumped 13.5 per cent, reflecting steady demand from infrastructure and construction activity. Steel output also remained robust, rising 6.9 per cent during the month.
Electricity generation increased by 5.3 per cent, pointing to sustained power demand from industry and households. Fertilizer production grew 4.1 per cent, offering support to the agricultural sector, while coal output rose 3.6 per cent, helping ease supply pressures.
Oil and Gas Remain a Weak Spot
In contrast, the oil and gas segments continued to struggle. Crude oil production declined by 5.6 per cent, while natural gas output fell 4.4 per cent in December compared to the same month last year. Petroleum refinery production also slipped 1.0 per cent, highlighting ongoing operational and supply-side challenges in the energy sector.
Cumulative Growth Still Modest
For the April–December 2025-26 period, the cumulative growth of the core industries stood at 2.6 per cent, slightly muted despite strong gains in cement and steel. Steel recorded a sharp 9.5 per cent cumulative growth, while cement rose 8.8 per cent.
However, coal, crude oil, and natural gas saw cumulative declines, which weighed on the overall index.
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January 20, 2026, 18:31 IST
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