By on April 29, 2020

ford

Call it the coronavirus crash. Ford Motor Company released its first-quarter 2020 financial results late Tuesday, revealing a deep dip into the red as March’s production shutdown and and domestic (and overseas) sales dive ate into earnings.

Free cash flow was negative $2.2 billion last quarter, Ford said, as it reported a net loss of $2 billion. Recall that a big deal was made over the company’s less-than-stellar Q4 2019 earnings report, which carried the weight of recalls and a botched product launch. That report now looks rosy.

As bad as Q1 2020 looks, Ford cautioned investors to brace themselves for an even grimmer Q2.

“According to [chief financial officer Tim Stone], today’s economic environment remains too ambiguous to provide full-year 2020 financial guidance. He said the company expects second-quarter adjusted EBIT to be a loss of more than $5 billion, as year-over-year industry volumes decline significantly in every region,” the automaker stated in its report.

Ford’s pre-tax loss in Q1 2020 was $632 million, with the actual dollar figure of the coronavirus impact pegged at $2 billion. The virus cratered sales in China in mid-January, lasting into February, while the European market followed the People’s Republic into lockdown a month after the initial Wuhan outbreak. North America fell like a domino in mid-March.

Being by far the automaker’s biggest revenue generator, the lingering impact of lockdown orders in the U.S. and Canada will push the worst of the hurt into the second quarter of the year (the region’s earnings before interest and taxes last quarter was not in the red). All that said, Ford says cash isn’t a problem. The company drew more than $15 billion from credit lines and issued $8 billion in bonds to firm up its position and weather the storm.

“We’ve taken decisive actions to lower our costs and capital expenditures and been opportunistic in strengthening our balance sheet and optimizing our financial flexibility,” Stone said. “We believe the company’s cash is sufficient to take us through the end of the year, even with no additional vehicle wholesales or financing actions.”

Jim Farley, Ford’s chief operating officer, said the company’s team in China “did a very good job managing through the crisis and provided us with a valuable template for bringing back up operations in the rest of the world” — useful stuff for the automaker’s phased restart of production in Europe, scheduled to commence next week.

In the U.S., Ford is rumored to be aiming for a May 18th restart date, following a kiboshed plan to fire up only a select few plants earlier in April.

[Image: Chris Tonn/TTAC]

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42 Comments on “Coronavirus Drags Ford Into $2 Billion Quarterly Loss...”


  • avatar
    ToolGuy

    “Everything’s not awesome
    Everything’s not cool
    I am so depressed
    Everything’s not awesome”

  • avatar
    EBFlex

    It’s a little convenient that the company that has produced a number of very low quality vehicles lately that are some of the worst in their class (Explorer and Escape) is solely blaming the Corona Cold. Never let a good crisis go to waste I guess.

    But any amount of loss is flat out ridiculous and the very obvious theme is we need to end this shut down nonsense. It’s already been proven to not work and it’s already been proven that it’s a complete, hysterical overreaction. Time to end the madness and restart this economy.

    • 0 avatar
      thelaine

      We had better, EB. We are creating an economic catastrophe.

      JP Morgan has sharply revised down its already dark forecast for second quarter economic growth. It now expects U.S. gross domestic product will shrink a staggering 40% in the second quarter on an annualized basis.

      “With these data in hand we think the April jobs report could indicate about 25 million jobs lost since the March survey week, and an unemployment rate around 20%,” they said.

      https://www.forbes.com/sites/pedrodacosta/2020/04/09/jp-morgan-now-sees-40-plunge-in-gdp-unemployment-surge-to-20/#3fe6a67e436c

    • 0 avatar
      brn

      Oh good, EBFlex is posting in a Ford article. I’m curious to see what his/her perspective is.

  • avatar
    DenverMike

    Ford is still in a better position than most automakers, especially moving forward.

    • 0 avatar
      tomLU86

      How is Ford in a better position?

      Ford is probably in a worse position than the typical automaker. The typical automaker is not in a good place.

      In the US, after the five best years (by volume), with about 88 million new cars on the road, the market is saturated. It was on the verge of a downturn, as this is a cyclical business.

      Now that the water level is down, the rocks are showing. Ford has more than most–I think. But I’m open to other opinions.

      The best run company is Toyota.

      • 0 avatar
        Scoutdude

        F-series. Ford dominates the fleet market and that brings in consistent profitable sales. Within that F-series they have already spent the money and are ready to be the first to market with a mass market hybrid and EV pickups. Both will earn a lot of fleet sales and at high margins thanks to gov’t fleets that have mandates to “buy green”. Meanwhile GM has just started working on their Electric pickup and all Ram has is the E-torque.

        Even in the last recession with record high gas prices driving consumers to more fuel efficient offerings the F-series remained the #1 selling vehicle in the US.

      • 0 avatar
        DenverMike

        The “best run” company should have an answer to the F-series. The best run company had less than 60 billion in cash savings, pre ‘rona. While that’s 2X more than Ford, it’s not that impressive, given “Ford”.

    • 0 avatar

      “ord is still in a better position than most automakers, especially moving forward.”

      But the problem is moving backward.

    • 0 avatar
      bd2

      “Ford is still in a better position than most automakers, especially moving forward.”

      – Not even close.

      Ford had an annual net income of just $47 million in 2019.

      Exec pay for the top 6 was $70 million (about half of that going to Hackett and Ford).

      In contrast, GM still earned $3 billion in profit despite a costly UAW strike.

      Ford, once again, has had to leverage itself to the hilt and it still owes billions from the last time around.

      Furthermore, this is where Barra retreating from unprofitable markets like Europe will pay off.

      Ford Europe will bleed $, esp. when the punitive CO2 penalties go into effect (tho, wouldn’t be surprised if they end up getting delayed), and after building factory after factory, sales in China are not panning out.

      After depleting its credit lines, Ford has about enough cash to operate as a going concern for about a year and half if conditions don’t improve.

  • avatar
    KingShango

    Fords wounds are 100% self inflicted. They abandoned cars because they somehow couldn’t earn a profit on nearly 300k Fusions a year despite being made in Mexico. And that might’ve been ok if their SUVs were stellar but the Ecosport is garbage, the brand new Escape just came in dead last in a C&D comparison, the Edge is ancient and they completely botched the Explorer launch. I mean it’s only their second most important vehicle why bother with quality checks right?!

    For what it’s worth the Mach E on paper seems like a solid Tesla fighter but they’re never going to make money off it and the fact they tried to package it as a Mustang shows they really don’t have any vision for the future. How long until they merge with someone?

    • 0 avatar
      EBFlex

      They didn’t just botch the Explorer and MKExplorer launch….they botched the entire vehicle.

      The Explorer usually comes in last or very close to it in any comparison. Interior materials are abysmal, the most popular powertrain is a terrible fit, transmission programming is terrible. All that in a vehicle that costs far more than the one that it replaced. For the outrageous amount of money they charge for those terrible vehicles you can’t even get LED turn signals/reverse lights in back. That’s how deep their cost cutting has gone. Many manufacturers can do full LED on vehicles that cost far less.

      • 0 avatar
        DenverMike

        EBFlex, since you’re an expert, what kind of money would you pin on all those failures? Hundreds of millions? A billion?

        Even if it’s 2 billion, what’s the totality of it? Buyers still line up for those agricultural Fords. Remember not everyone is looking for what you and the review boards think they are.

        “Car and Driver” included the 2001 PT Cruiser in its “Ten Best” list and the PT Cruiser also won the “North American Car of the Year” award. There’s no telling what turns them on/off.

        • 0 avatar
          EBFlex

          “EBFlex, since you’re an expert, what kind of money would you pin on all those failures? Hundreds of millions? A billion?”

          Remains to be seen. We already know the Explorer and MKExplorer launch was the primary reason Ford lost 3.6 billion last year. That’s straight from the Hack job himself.

          Add the continuing and vast quality issues, lost sales because it’s just not competitive, and all the issues with the Escape and it’s clear the final numbers will be in the tens of billions.

          Ford knew the Explorer was going to be a dud…that is why they put the fleet and retail sales back together as one. Nice little trick to pad the numbers.

          • 0 avatar
            DenverMike

            So Ford has the potential, if they can get their “stuff” together, to be as profitable as Toyota? Say it isn’t so.

            It seems like Ford upper management made all the right calls, including the killing of some segments, but they were botched somewhere in middle management.

            It appears the Explorer is meant for fleets, law enforcement especially, with a side order of retail. Rude, crude and 4Lo 4X4.

            Retail customers could be much better served by FWD based SUVs.

          • 0 avatar
            EBFlex

            Any automaker has potential.

            Ford could have built a vehicle as good as the Telluride or the 2019 Ram. They choose not to. Those vehicles disprove Ford’s business model that quality is exclusively tied to price. It also destroys their insistence that the way forward is having vehicle programs that must show a minimum percentage of profitability. It causes designers to cut corners, they count corners on materials, they cut corners on engineering, and they cut corners on manufacturing.

            The result (as seen in the Explorer/MKExplorer and Escape) are vehicles that are simply awful. Behind the competition in almost every single way.

          • 0 avatar
            DenverMike

            Had Ford not screwed up so badly, they’d be within spitting distance of Toyota net profits. How many automakers have that kind of potential?

            That comes directly from Ford killing their unprofitable cars. All remaining lines don’t need overly cost cutting to be acceptably profitable.

            It comes from starting with profitable vehicles first, not taking losers and carving their way to profitability. That was the former Ford.

            Since Ford took cost cutting way too far, and it’s clearly evident, it can be fixed.

            Lesser brands that are doing everything to produce perfect or “quality” vehicles, what more can they do to get to Ford levels of potential?

    • 0 avatar
      JimZ

      “They abandoned cars because they somehow couldn’t earn a profit on nearly 300k Fusions a year”

      2017:209,623 – 2018:173,600 – 2019:166,045

      looking for that “300k Fusions a year.”

      Why can’t people put 15 seconds of effort in before opening their mouths?

      The only midsize sedan clearing 300k/year is the Camry, and they might not make that this time. The only other one that’s close is the Accord, and they didn’t reach 300k last year. The Accord’s 265k sales last year is what the Fusion did in 2016. With incentives I doubt the Accord is making much money, though Honda will probably keep making it forever regardless if for no reason other than pride.

      • 0 avatar
        Scoutdude

        Yup they did make money on them when they were selling over 200k per year and even at 150k per year. However because car sales have been on a downward trajectory they didn’t think there would be enough volume in 4 or 5 years to be profitable enough to justify a new generation.

      • 0 avatar

        “looking for that “300k Fusions a year.””

        It is the Internet. You have to adjust (the reality) by factor of 3 at least.

      • 0 avatar
        KingShango

        Jim Z, I found the 300k you were looking for; 2015: 300,170 – 2014: 306,860 – 2013: 295,280

        Weird how you missed those.

        The bottom line is that the Fusion was successful until Ford let it wither on the vine. I doubt that Honda is making Accords just for fun. Other companies manage to make money on cars, why can’t Ford?

        • 0 avatar
          JimZ

          I didn’t miss anything. The decision to exit the segment was s apparently long after volumes dropped.

          And in case you hadn’t noticed, EVERY MID SIZE SEDAN has seen a similar sales drop. Honda and Toyota just started from a higher number. And you have no evidence anyone else is making much if any money in the segment either, Camry? Probably a bit. Accord? Maybe. Malibu? Probably not. Sonata? Gotta be losing their shirts.

          • 0 avatar
            KingShango

            You are missing something, you’re missing the point.

            Despite those sales declines Toyota, Honda and Hyundai all introduced new mid size cars in the last 1-2 years. So did Subaru and Kia will be shortly. Obviously there’s money to be made in the segment. Especially when you consider that they don’t have the F-150 to dump money into the coffers.

            My original point stands; Ford seems to be learning the wrong lessons. If they really weren’t making money on the Fusion the solution isn’t to abandon it, the solution is to figure out why they’re not making money. If Honda can make money on a car built in Ohio why can’t Ford make money on a car built in Mexico? Or, if transitioning to SUVs and trucks really is the right call then those products need to be class leading because there’s no room for error anymore. The launch issues with the Explorer are inexcusable, it’s their second most important vehicle.

          • 0 avatar
            DenverMike

            Even selling 200K annually, a Ford sedan can’t touch the profitability of a Honda or Toyota, or even Hyundai or Subaru. No comparison.

            It’s a highly competitive segment and Ford Fusion/Focus/etc buyers expected very deep discounts, fleet or retail. Then corners had to be cut, which leads to all kinds of fallout.

            I can’t believe it’s worth doing unless it’s extremely profitable. There’s way too many liabilities and just one recall can easily cost a billion dollars.

            A Ford sedan shouldn’t lean on the F-150/F-series. Every model/line should be contributing heavily. Why even have weak links.

            Having a full lineup of vehicle is overrated. Consider all the brands that don’t compete in pickups. Or pony/sports cars. And have no answer to the Wrangler, pickup or not.

          • 0 avatar
            JimZ

            “Despite those sales declines Toyota, Honda and Hyundai all introduced new mid size cars in the last 1-2 years. So did Subaru and Kia will be shortly. Obviously there’s money to be made in the segment.”

            If you tell me Hyundai is making any money on the Sonata at 80-90k sales per year, I will laugh in your face.

          • 0 avatar

            ” If Honda can make money on a car built in Ohio why can’t Ford make money on a car built in Mexico?”

            How about UAW?

          • 0 avatar
            bd2

            W/ the new Sonata (putting aside the pandemic), should once again sell 100k+, but still a far cry of 230k+ in sales at its height.

            But unlike the domestics or even Honda (not much Accord sales in Japan), Hyundai also sells tons of the Sonata in Korea.

            On top of that, Hyundai also earns $ on every sale of the Optima (combined, Sonata/Optima sales is usually good for 3rd place in the US).

            As recently as 2015, Kia had global sales of nearly 309k for the Optima.

            Even if that figure ends up being closer to 200k for the new Optima – that and along w/ say, 250k-275k sales for the Sonata is more than enough to get a decent ROI for HMG.

      • 0 avatar
        bd2

        Taking out overseas markets, Honda makes more w/ the Accord than Toyota does the Camry, as a good % of Camry sales is to fleet.

  • avatar
    Menar Fromarz

    Where is Cerberus when you need them.

    • 0 avatar
      JimZ

      Nowhere.

      NOBODY needs private equity.

      • 0 avatar
        dal20402

        #NotAllPrivateEquity

        There are still some private equity firms out there that actually try to build good businesses for resale, and they serve a useful function. Too bad they’ve been tainted by association with Cerberus and its ilk, who come in, steal everything that’s not bolted down, saddle the company with debt, steal the money, and run away before the new shareholders realize they’ve been stuck with a rotten debt-infested husk.

        • 0 avatar
          JimZ

          the instant you see that PE is buying a company via a leveraged buyout (LBO) you can start the clock ticking. Should be illegal, but, you know, “freedom.”

    • 0 avatar

      “Where is Cerberus when you need them.”

      It is not a Home Depot. Their IQ was not high enough to handle even Chrysler.

  • avatar
    Jeff S

    Doesn’t help Ford to have recalls on new models they have just introduced–Escape, various Lincolns, Edges, Explorers, and Rangers. Ford needs to get these products right especially for new product launches. Ford also needs to introduce less costly versions of some of their products. A less costly and more base Ranger would be good and price it at 19k.

  • avatar
    thelaine

    Ford and GM just seem to hang around and survive while lurching from one “shakeup” to another.

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