After Ford Motor Co. reported a $2 billion net loss in the first quarter and warned of more than $5 billion in operating losses in the second quarter, analysts on a Bank of America webcast last week asked executives if they would consider spinning off the company's profitable captive arm.
"Heck no," Ford COO Jim Farley said. "When you look at the stress the dealer's been under over the last couple of months, Ford Credit has been indispensable."
Farley emphasized the effect of leveraging an auto lender whose operations are interwoven with the automakers. The relationship allowed Ford to rapidly launch aggressive incentives in the market as the coronavirus closed stores and slowed vehicle sales nationwide. The fruits of those incentives were reflected in vehicle sales figures for the end of March and the beginning of April, during which the Detroit 3 automaker's captives gained the highest market share of new-vehicle originations since 2004.
Ford Credit now generates about half of the automaker's profit, up from 15 to 20 percent as recently as 2016.
Within the past 20 years, Ford Credit has returned $29 billion in dividends to the automaker, Ford Credit CEO Marion Harris pointed out. In March, the lender modified a piece of its longstanding agreement with Ford to return $3 billion in revolving credit to the automaker.
"Ford Credit had significant asset excess liquidity, which we didn't need and we particularly don't need as the balance sheet is shrinking," Harris said. "It's best served back at the parent."