Ford Expects Coronavirus Shutdown To Cause $600 Million Quarterly Loss
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Ford Motor said on Monday it expects to post a pre-tax loss of about $600 million for the first quarter as the coronavirus outbreak pummeled its sales and shuttered vehicle assembly plants, resulting in a 21% drop in vehicle sales to dealers versus the same quarter in 2019.
The news sent Ford’s shares down more than 5% in morning trading.
Only Ford’s joint ventures in China, where the COVID-19 pandemic has been receding, are currently producing vehicles. The automaker said it is working on a scenario for a phased restart of its manufacturing plants beginning in the second quarter.
“However, we believe we have sufficient cash today to get us through at least the end of the third quarter with no incremental vehicle production and wholesales or financing actions,” Chief Financial Officer Tim Stone said in a statement.
Global automakers reeling from the COVID-19 pandemic are accelerating efforts to restart factories from Wuhan to Maranello to Michigan, using safety protocols developed for China and U.S. ventilator production operations launched in recent weeks. Cia
Asked whether Ford would apply for loans from the U.S. government or the Federal Reserve to sustain its operations for longer if needed, a spokesman for the automaker said that unlike during the Great Recession – when financing dried up – there is still plenty of liquidity in the capital markets.
“We have a broad range of options” for obtaining additional financing if needed, the spokesman said.
As of April 9, Ford said it had about $30 billion in cash on its balance sheet, including $15.4 billion it borrowed last month against two existing credit lines.
Ford said any decisions on restarting its plants will be made “in cooperation with local unions, suppliers, dealers and other stakeholders.”
In March, the company shuttered plants in North America and Europe due to the spreading pandemic.
Earlier this month, the No. 2 U.S. automaker said its first-quarter U.S. sales had fallen 12.5% during the quarter. The U.S. market, with its highly profitable pickup truck and SUV segments, generates the overwhelming majority of Ford’s profits.
Ford’s U.S. sales chief Mark LaNeve said on April 2 that Ford believes some level of government stimulus will be needed for American consumers once the COVID-19 pandemic recedes.
Ford said it expects its first-quarter adjusted loss before interest and taxes to be about $600 million, compared with a profit of $2.4 billion a year ago.
The company said it expects to report revenue of about $34 billion for the quarter.
Questions & Answers
Q.What is the expected pre-tax loss for Ford in the first quarter due to the coronavirus shutdown?
What is the expected pre-tax loss for Ford in the first quarter due to the coronavirus shutdown?
Ford expects a pre-tax loss of about $600 million for the first quarter. This is primarily due to reduced sales and the closure of vehicle assembly plants caused by the coronavirus outbreak.
Q.Which of Ford's manufacturing operations are still producing vehicles?
Which of Ford's manufacturing operations are still producing vehicles?
Only Ford's joint ventures in China are currently producing vehicles. The COVID-19 pandemic has been receding in China, allowing these operations to continue.
Q.Does Ford have enough cash to manage without immediate vehicle production or financing actions?
Does Ford have enough cash to manage without immediate vehicle production or financing actions?
Yes, Ford believes it has sufficient cash on hand to operate through at least the end of the third quarter, even without incremental vehicle production or additional financing.
Q.What was Ford's cash balance as of April 9, and did this include recent borrowing?
What was Ford's cash balance as of April 9, and did this include recent borrowing?
As of April 9, Ford had approximately $30 billion in cash on its balance sheet. This total included $15.4 billion that the company borrowed last month against existing credit lines.