DETROIT -- Ford Motor Co. is suspending its cash dividend, tapping credit lines to raise additional cash and withdrawing previous financial guidance amid the coronavirus pandemic.
The automaker said Thursday it will borrow the total unused amounts against two lines of credit: $13.4 billion under a corporate credit facility and $2 billion under a supplemental credit facility.
Ford said the extra cash will be used to offset temporary working capital impacts tied to coronavirus-related production shutdowns in North America and Europe, and to preserve financial flexibility. Ford said earlier this week it would idle all North American plants until March 30, and also announced plant closures in continental Europe.
“Like we did in the Great Recession, Ford is managing through the coronavirus crisis in a way that safeguards our business, our workforce, our customers and our dealers during this vital period,” Ford CEO Jim Hackett said in a statement. “As America’s largest producer of vehicles and largest employer of autoworkers, we plan to emerge from this crisis as a stronger company that can be an engine for the recovery of the economy moving forward.”
Ford has paid a quarterly cash dividend of 15 cents per share since 2016, costing the automaker roughly $2.4 billion per year, according to a spokesman. It was producing a roughly 6.5 percent annual divided yield earlier this year before the coronavirus pandemic sent global equity markets tumbling. Ford shares closed Thursday's trading down a fraction to $4.47 as the market rallied later in the day.
Ford previously said it expected adjusted free cash flow in 2020 of $2.4 billion to $3.4 billion and adjusted earnings before interest and taxes of $5.6 billion to $6.6 billion. It plans to provide updated guidance on 2020 earnings and revenue when it releases first-quarter financial results on April 28.
Ford previously planned to hold $20 billion in cash and $30 billion in liquidity heading into a potential economic downturn. The company had $22 billion in cash and $35 billion in liquidity at the end of 2019.
“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,” Hackett said. “Our Ford people are extremely resilient and motivated, and I’m confident in the actions we are taking to navigate the current uncertainty while continuing to build toward the future.”
Credit relief
Separately, Ford said it will offer new customers up to six months of payment relief when they finance through Ford Credit under a new program aimed at sparking sales.
The automaker said it would cover three months' worth of payments and let buyers defer an additional three months on all new 2019 and 2020 model-year vehicles except 2020 Super Duty pickups.
Additionally, Ford said it would provide undisclosed payments and "additional awards" to dealerships that deliver vehicles to customers instead of asking them to come into showrooms in March and April. It was not immediately clear how much the dealer payments would be.
Ford said more than three-quarters of its retail network can work with customers on remote vehicle delivery for sales and service. It has developed a new disinfecting procedure for dealers delivering new and loaner vehicles, based on guidelines from the Centers for Disease Control and Prevention.
"Our dealers are incredibly connected to their communities," Kumar Galhotra, Ford's president of North America, said in a statement. "They're willing to lend a hand by doing whatever it takes to help our customers in this time of need."
Other efforts
The new financial relief program, called "Built to Lend a Hand," is in addition to a program Ford Credit announced Monday that allows existing customers to defer payments. As part of the program, Ford pulled all national advertising to focus on two spots about the relief program.
General Motors also is providing relief to dealers.
GM Financial earlier this week said it is temporarily waiving curtailments, which is the principal a dealer owes to pay down floorplan inventory that sits on the lot longer than most vehicles, including demo cars and loaners. Dealers can get a waiver to keep that inventory but delay payments for 90 days.
General Motors' captive also has guaranteed that dealer dividend payments, which are based on retail loan penetration and other factors, will be consistent with the previous month.
