Ford Nixes Dividend, Suspends Guidance

By Matt Grossman and Mike Colias 

Ford Motor Co. said Thursday it would shore up its balance sheet by drawing on credit lines and suspending dividends as the Covid-19 pandemic roils the economy.

The company also withdrew its guidance for 2020 issued in early February, citing economic uncertainty. Ford had guided for adjusted earnings per share of 94 cents to $1.20.

The automobile giant told its lenders that it will draw down the entirety of two lines of credit, including $13.4 billion from a corporate credit facility and $2 billion from a supplemental facility. Ford also suspended its dividend, a move aimed to improve financial flexibility in the short term, it said.

The dividend suspension could save the company roughly $2.4 billion annually.

"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," Jim Hackett, Ford's chief executive, said in a statement.

Ford also unveiled a plan to relieve customers of payments on some new cars. For buyers of 2019 and 2020 model-year vehicles, the company said it will cancel three months' worth of payments and would defer three additional months.

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

Ford's decision to temporarily close all its factories in North America through at least March 30 will have an immediate impact on its cash flow and bottom line, because car makers book revenue as soon as they ship vehicles from the plant to the dealership.

The company relies on the North America market and its in-house lending arm for virtually all of its global profit, having swung to losses overseas. A protracted shutdown of its plants in the U.S., Canada and Mexico would have a severe impact on its cash flow and operating profit, analysts say. The company also has suspended some production in Europe.

The company is in the midst of an $11 billion, multiyear restructuring that has crimped its cash flow, which already had been dwindling in recent years. Company executives have said the dividend is being funded from cash on the balance sheet, rather than cash flow, but had planned to continue paying it.

"We like to return value to shareholders," Mr. Hackett said during a conference call with analysts in February. "The dividend's been a legendary value creator at Ford...I want to continue that."

Write to Mike Colias at [e-mail]

(END) Dow Jones Newswires

March 19, 2020 10:28 ET (14:28 GMT)

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