Ford Nixes Dividend, Suspends Guidance -- 2nd Update

By Mike Colias and Matt Grossman 

Ford Motor Co. said Thursday it would shore up its balance sheet by drawing on credit lines and suspending dividend payments, a signal of the looming financial damage facing global auto makers as the Covid-19 pandemic continues to depress sales and shut down manufacturing lines.

The company also withdrew its guidance for 2020 issued in early February, citing economic uncertainty, and plans to provide a new outlook next month. Ford had forecast adjusted earnings per share of 94 cents to $1.20.

The automobile giant told its lenders it would draw down the entirety of two lines of credit -- $13.4 billion from a corporate credit facility and $2 billion from a supplemental facility -- to boost its cash position as it temporarily shuts down plants in North America.

Ford also suspended its dividend for the first time since before the financial crisis, a move aimed at improving financial flexibility in the short term, it said. The dividend suspension could save the company roughly $2.4 billion annually.

The economic fallout from the widening pandemic has prompted auto analysts to scrutinize auto makers' balance sheets to assess companies' preparedness for a severe drop in production.

Ford, the U.S.'s second largest car maker by sales, was already wrestling with falling sales, troubles overseas and a slumping stock price before the health crisis hit.

Chief Executive Jim Hackett had been fending off questions from investors about the pace of his plan to reverse a yearslong profit decline. Ford has missed Wall Street earnings forecasts in three of the past five quarters, battering shares even before the recent coronavirus-driven selloff. Some analysts in recent days have questioned whether Ford would cut its dividend to preserve cash.

Making cars is a capital-intensive, low-margin business; auto makers typically carry global operating margins of less than 10%, leaving car companies vulnerable to sharp economic downturns.

"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," Mr. Hackett said in a statement.

Ford last suspended its dividend in 2007, ahead of the last financial crisis, during which it narrowly avoided bankruptcy. It restored its dividend in 2012.

Write to Mike Colias at [e-mail]

(END) Dow Jones Newswires

March 19, 2020 13:23 ET (17:23 GMT)

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