Ford Motor Company is shutting down factories as CEO Jim Farley reveals the automaker is in a “day to day” struggle to secure essential rare earth magnets needed for vehicle production.

At a Glance

• Ford CEO Jim Farley reports the company is struggling with rare earth magnet supplies, leading to factory shutdowns
• China controls over 90% of global rare earth processing capacity and has imposed new export licensing requirements
• Despite temporary export licenses for major U.S. automakers, Ford continues experiencing supply chain disruptions
• Western countries are investing in alternative sources in Australia, Canada, and the United States to reduce Chinese dependence
• Ford previously halted production of its Explorer SUV in Chicago due to rare earth shortages

Ford’s Rare Earth Crisis Unfolds

Ford Motor Company’s electric vehicle ambitions face a serious obstacle as supply chain issues with rare earth magnets force production halts across its manufacturing network. These magnets are critical components in modern vehicles, particularly electric models, serving essential functions in motors and various electrical systems. The shortage highlights the vulnerability of American manufacturing to international supply constraints, particularly those involving China, which dominates the global rare earth processing industry.

CEO Jim Farley did not mince words when describing the severity of the situation to Bloomberg News. The executive painted a picture of a company operating on the edge of its supply capabilities, with production continuity hanging by a thread. Ford’s challenges reflect broader concerns about America’s industrial security and dependence on foreign suppliers for critical materials needed in the transition to green technologies.

China’s Dominant Position Creates Vulnerability

The root of Ford’s problems lies in China’s overwhelming control of the rare earth market. With more than 90% of global processing capacity, China’s recent implementation of new export licensing rules has created significant disruptions for Western manufacturers. These regulations require rare earth exporters to obtain special permits before shipping materials abroad, giving Chinese authorities considerable leverage over global supply chains.

“It’s day to day,” Farley said. “We have had to shut down factories. It’s hand-to-mouth right now.”, stated Jim Farley.

While China has granted temporary export licenses to suppliers serving major U.S. automakers, including Ford, General Motors, and Stellantis, these measures have proven insufficient to prevent manufacturing disruptions. The situation underscores the strategic disadvantage faced by American manufacturers in an era of increasing competition for critical minerals needed for advanced technologies and green energy transition.

Ford’s Response and Market Impact

Ford has already been forced to halt production at its Chicago assembly plant, where the popular Explorer SUV is manufactured. These disruptions come at a challenging time for Ford, with shares dropping nearly 1% in morning trading following the news. Despite this setback, the company’s stock has shown resilience, posting gains of over 7% since the beginning of the year, suggesting investors maintain confidence in Ford’s long-term prospects.

“Ford Motor Co is struggling with supplies of rare earth magnets, the automaker’s CEO Jim Farley told Bloomberg News in an interview on Friday.”, said Jim Farley.

The situation highlights a growing national security concern as American manufacturers navigate the complex geopolitical landscape of critical mineral supplies. Western countries, recognizing the strategic vulnerability, are actively investing in alternative rare earth sources and processing facilities in Australia, Canada, and the United States. However, developing these alternative supply chains requires significant time and capital investment, leaving companies like Ford to manage immediate shortages while longer-term solutions develop.

Broader Implications for American Manufacturing

Ford’s struggles represent just one example of a broader vulnerability facing American manufacturing. As the automotive industry transitions toward electric vehicles, which require significantly more rare earth materials than traditional combustion engines, securing reliable supply chains becomes increasingly critical. The current situation serves as a stark reminder that America’s industrial independence requires not just manufacturing capacity, but also secure access to the raw materials that feed those factories.

For consumers, these supply chain disruptions could eventually translate to higher prices and limited availability of certain vehicle models. More broadly, the situation highlights the strategic importance of developing domestic rare earth mining and processing capabilities as part of a comprehensive approach to industrial policy and national security. As Ford continues navigating these challenges, its experience serves as a case study in the complex interplay between international trade, industrial policy, and America’s competitive position in key manufacturing sectors.