F Ford Motor Company

By Mike Colias and Matt Grossman 

Ford Motor Co. said Thursday it would shore up its balance sheet by drawing on credit lines and suspending dividend payments, a signal of the looming financial damage facing global auto makers as the Covid-19 pandemic continues to depress sales and shut down manufacturing lines.

The company also withdrew its guidance for 2020 issued in early February, citing economic uncertainty, and plans to provide a new outlook next month. Ford had forecast adjusted earnings per share of 94 cents to $1.20.

The automobile giant told its lenders it would draw down the entirety of two lines of credit -- $13.4 billion from a corporate credit facility and $2 billion from a supplemental facility -- to boost its cash position as it temporarily shuts down plants in North America.

Ford also suspended its dividend for the first time since before the financial crisis, a move aimed at improving financial flexibility in the short term, it said. The dividend suspension could save the company roughly $2.4 billion annually.

The economic fallout from the widening pandemic has prompted auto analysts to scrutinize auto makers' balance sheets to assess companies' preparedness for a severe drop in production.

Ford, the U.S.'s second largest car maker by sales, was already wrestling with falling sales, troubles overseas and a slumping stock price before the health crisis hit.

Chief Executive Jim Hackett had been fending off questions from investors about the pace of his plan to reverse a yearslong profit decline. Ford has missed Wall Street earnings forecasts in three of the past five quarters, battering shares even before the recent coronavirus-driven selloff. Some analysts in recent days have questioned whether Ford would cut its dividend to preserve cash.

Making cars is a capital-intensive, low-margin business; auto makers typically carry global operating margins of less than 10%, leaving car companies vulnerable to sharp economic downturns.

"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," Mr. Hackett said in a statement.

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

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

March 19, 2020 13:23 ET (17:23 GMT)

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