Ford profit hits skids amid factory closures due to coronavirus

Ford has reported a larger pretax loss, adjusted for one-time items, than the company was expecting.

Ford says it has an adequate cash cushion

Ford has reported a larger pretax loss, adjusted for one-time items, than the company was expecting and said that number was expected to top $US5bn ($7.7bn) in the current quarter.

Ford also said on Tuesday that it had about $US35bn in cash, enough to cushion it through to the end of the year even if it were unable to resume factory output because of the coronavirus outbreak. Ford and other major carmakers have idled their plants in the US, Europe and elsewhere since mid-March.

Ford said its first-quarter adjusted loss before taxes was $US632m and the pandemic had drained at least $US2bn from its earnings in the period. The carmaker earlier this month had said it expected adjusted pretax earnings of about $US600m and a 16 per cent drop in revenue.

Ford overall reported a net loss of $US1.99bn, or US50c a share, and revenue of $US34.32bn, down 15 per cent from a year earlier.

According to FactSet, analysts expected a loss of US8c a share and $US34.69bn of revenue.

Car production was halted last month and demand in the industry has slowed because of the pandemic, but The Wall Street Journal this week reported that major car manufacturers, including Ford, were planning to partly reopen factory production in the US starting on May 18. Ford said on Tuesday it would begin opening European plants next week.

Since closing its European and US factories last month, the company has bolstered its cash reserves. It eliminated its dividend, tapped about $US15bn in credit lines and issued $US8bn in unsecured debt.

“Our objective is not just to withstand the crisis,” finance chief Tim Stone said. “We’re assuring the flexibility to continue to invest in our future.”

Mr Stone said the cash cushion should allow Ford to continue investing in vehicle-development programs. Still, some projects were likely to get delayed or even fall victim to the coronavirus crisis. Ford confirmed on Tuesday that it had cancelled plans for a Lincoln-brand electric vehicle that was to be developed with start-up truck maker Rivian Automotive.

The coronavirus outbreak came at a difficult time for Ford. The company is in the early stages of a multi-year plan to close factories and lay off thousands of workers in Europe and South America, regions where Ford is repositioning itself as a smaller player ­focused on more profitable market segments such as commercial trucks and vans.

As of February, Ford had spent $US1.1bn for its plan, whose cash cost is expected to total $US7bn when the overhaul is completed within a few years. Heavier costs from fresh debt, combined with a cash burn from closed plants, could complicate the restructuring, analysts have said.

Mr Stone said on Tuesday the plan was on course.

Ford also said on Tuesday that it had pushed back its 2021 target date to begin an autonomous-­vehicle service to 2022.

The company, which is working on driverless-car technology with Pittsburgh-based start-up Argo AI, said it wanted to re-evaluate the long-term effect of the pandemic on consumer behaviour, but that its technology remained on track.