Dearborn’s Ford Motor Co. reported today it is taking a series of initiatives to bolster its cash position amid the coronavirus health crisis, maintain strategic flexibility on behalf of its team and customers, and set up Ford to separate itself from competitors when the global economy emerges from the crisis.
“Like we did in the Great Recession, Ford is managing through the coronavirus crisis in a way that safeguards our business, our workforce, our customers, and our dealers during this vital period,” says Jim Hackett, CEO of Ford. “As America’s largest producer of vehicles and largest employer of autoworkers, we plan to emerge from this crisis as a stronger company that can be an engine for the recovery of the economy moving forward.”
The company notified leaders Thursday that it will borrow the total unused amounts against two lines of credit: $13.4 billion under its corporate credit facility and $2 billion under its supplemental credit facility. The incremental cash from these borrowings will be used to offset the temporary working capital impacts of the coronavirus-related production shutdowns and preserve Ford’s financial flexibility.
“While we obviously didn’t foresee the coronavirus pandemic, we have maintained a strong balance sheet and ample liquidity so that we could weather economic uncertainty and continue to invest in our future,” Hackett says. “Our Ford people are extremely resilient and motivated, and I’m confident in the actions we are taking to navigate the current uncertainty while continuing to build toward the future.”
Ford has described targets of having $20 billion in cash and $30 billion in liquidity heading into an economic downturn. At the end of 2019, those levels were $22 billion and $35 billion, respectively.
Ford also announced it has suspended the company’s dividend, prioritizing near-term financial flexibility and continued investments in a series of new-product launches in 2020 and long-term growth initiatives.
The company also is withdrawing the guidance it gave on Feb. 4 for 2020 financial performance, which did not factor in effects of the virus. It will provide an update on the year when it announces first-quarter results, which is scheduled for April 28.
Ford announced plans to temporarily stop production at its plants in North America and Europe starting today. It will work with labor representatives to restart production in weeks to come.
Hackett noted that China was the first country to face the virus and now is emerging from the crisis. Automobile demand is improving in the country.
Separately, Ford and its U.S. dealers are offering customers who are dealing with virus challenges six months of payment relief for new-car buyers under its new Built to Lend a Hand program.
Under the program, Ford is offering six months of payment relief for eligible new car customers who finance their purchases through Ford Credit. Ford will pay for three months and customers can defer for up to three months. The program is for people purchasing 2019 and 2020 model year vehicles, excluding 2020 Super Duty trucks.