Ford Suspends Dividend and Draws Down Credit Lines
The same week the Dearborn-based automaker closed plants in Germany and Romania following other European auto giants, and said it is doing the same in the U.S. until March 31st, the company has taken several steps to safeguard its financial position following dramatic market instability related to the COVID-19 pandemic.
Ford has suspended the company’s dividend in order to preserve cash reserves, and has also drawn down two lines of credit—$2 billion under its supplemental credit facility and $13.4 billion under its corporate credit facility—totaling $15.4 billion.
Both moves aim to keep a maximum amount of cash on hand: The automaker wants $20 billion in cash and $30 billion in liquidity heading into a global economic downturn, compared to $22 billion and $35 billion in 2019, respectively. Ford has also withdrawn its guidance on 2020 financial performance issued back on Feb. 4, not factoring in issues related to a possible pandemic.
“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,” said Ford CEO Jim Hackett. “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.”
In order to keep at least some sales moving, Ford has launched a “Build to Lend a Hand” program for vehicle buyers, offering eligible customers a three-month-payment deferral, with Ford paying for another three months. The program applies to new buyers purchasing 2019 and 2020 model year vehicles through Ford Credit (as opposed to an outside lender), with the only exception to the Ford program being the 2020 Ford F-Series Super Duty truck.
“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,” Hackett said. “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.”
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