Moneycontrol PRO
Open App
Live: LIVE: Supreme Court | Live Streaming
you are here: HomeNewsBusiness

Ford expects $5 billion loss in current quarter as coronavirus hits demand

But added it had enough money despite the crisis to last the rest of 2020.

April 29, 2020 / 08:40 AM IST

Ford Motor Co said on Tuesday its second-quarter loss would more than double to over $5 billion from $2 billion in the first quarter due to the impact of the coronavirus pandemic, but added it had enough money despite the crisis to last the rest of 2020.

"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," Chief Financial Officer Tim Stone said in a statement.

But he called the current economic environment "too ambiguous" for the No. 2 U.S. automaker to give a full-year 2020 earnings forecast.

"There's no denying the negative economic consequences of a pandemic," Chief Executive Jim Hackett said on a conference call with analysts.

The Dearborn, Michigan-based company has slashed costs during the COVID-19 outbreak to weather the shutdown, including cutting salaries of executives and white-collar employees.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

Ford also moved to cut spending on projects, saying on Tuesday it was pushing back its commercial autonomous vehicle services by a year to 2022 and that it had decided not to develop a previously announced luxury electric Lincoln sport utility vehicle in partnership with electric vehicle maker Rivian.

Ford shares were down more than 4.6% in after-hours trading on Tuesday after closing the regular session at $5.38.

Ford‘s market value of $20.6 billion is now less than the $35 billion in cash it had on hand as of last Friday, an indication that investors expect the company to burn through significant amounts of cash before a recovery takes hold.

Ford had preannounced the pandemic-fueled first-quarter loss earlier this month. That warning came the same day the company raised $8 billion from corporate debt investors.

Last month, Ford moved to hoard cash on its balance sheet, drawing down $15.4 billion from two credit lines and suspending its dividend, in a move to bolster reserves to ride out damage to its business.


Virtually all U.S. automotive production ground to a halt in March as the number of COVID-19 infections grew rapidly. But with President Donald Trump pushing for Americans to get back to work and several U.S. states beginning to reopen their economies, the focus in the auto sector has shifted to when production can be restarted.

In an earlier conference call with reporters, Stone, the CFO, said the company would restart U.S. production "as soon as practicable," but did not give a timeline.

Ford's captive finance arm posted $30 million in first-quarter pretax earnings, down $771 million from a year ago. That included $600 million in additional-loss reserves, plus higher depreciation of former lease vehicle sales and expected lease defaults – in preparation for the estimated future impact of the coronavirus on the finance unit's performance.

Ford, General Motors Co and Fiat Chrysler Automobiles NV (FCA) are aiming to resume production some time in May, and are negotiating with the United Auto Workers (UAW) union, which represents their U.S. hourly workers, about how to safely resume vehicle production. FCA and GM are scheduled to report quarterly results on May 5 and 6, respectively.

Last week, the UAW said it was "too soon and too risky" to reopen auto plants in early May.

Ford, whose credit rating has been downgraded to "junk" status by Standard & Poor's, said previously it hoped to resume production in April at plants that make its most profitable vehicles, but subsequently backed off those plans.

Ford said on Tuesday it would restart most of its European manufacturing starting next Monday. It has already resumed operations in China, where the pandemic began and where sales fell 35% in the first quarter. U.S. sales fell 12.5%.

Once North American production resumes, the question will be how fast U.S. demand bounces back.

Ford said it expected to spend $700 million to $1.2 billion on its global restructuring this year, but executives said the automaker was looking at additional actions.
first published: Apr 29, 2020 08:35 am
ISO 27001 - BSI Assurance Mark