DETROIT -- Ford Motor Co. on Thursday said it was suspending its dividend and withdrawing previous financial guidance amid the coronavirus pandemic.
The automaker also said it will borrow the total unused amounts against two lines of credit: $13.4 billion (all figures in USD) under its corporate credit facility and $2 billion under its supplemental credit facility.
Ford said the money from these borrowings will be used to offset the temporary working capital impacts of the coronavirus-related production shut downs and to preserve Ford’s 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 divided 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 per cent annual divided yield earlier this year before the coronavirus pandemic sent stocks tumbling. Ford shares fell 7 per cent in early trading to $4.15.
On its guidance, 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 will provide an update at its first quarter earnings call next month.
Ford previously targeted $20 billion in cash and $30 billion in liquidity for flexibility heading into a potential economic downturn. Ford said Thursday that, at the end of 2019, it had $22 billion in cash and $35 billion in liquidity.
“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.”
In a separate announcement, 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 didn't make clear whether the program applied in Canada, too. Neither Ford Canada or Ford Credit were immediately available comment.
In that statement, 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.