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Ford hoards cash, withdraws profit forecast amid coronavirus outbreak

Ben Klayman Mar 19 2020

Dave Parker

DETROIT (Reuters) - Ford Motor Co (F.N) on Thursday moved to hoard cash on its balance sheet, drawing down $15.4 billion from two credit lines and suspending its dividend, in a move to bolster reserves to ride out damage to its business from the coronavirus pandemic.

The No. 2 U.S. automaker, whose shares closed off slightly after sinking as much as 8.9% earlier in the day, also abandoned its 2020 financial forecast and said the cash would be used to deal with a squeeze on capital caused by shutdowns in production due to the fast-spreading virus. 

The move will give Ford more than $37 billion in cash, almost matching the revenue it reported in the fourth quarter. That dwarfs the company’s market capitalization of about $18 billion. 

Morgan Stanley analyst Adam Jonas said in a research note that corporate liquidity during the outbreak was “top of mind” and that U.S. automakers had strong balance sheets. 

The coronavirus outbreak, which started in China last year, has caused about 219,000 infections and more than 8,900 deaths globally. 

Comparing the current economic situation to the 2008-2009 financial crisis, Chief Executive Jim Hackett said Ford was putting in place safeguards to protect its business. 

“We’re at war with the virus and Ford is going to win,” Hackett told employees on a video conference. 

Ford has come under fire from some analysts on Wall Street for moving too slowly to cut costs and restructure its business. 

At the end of last year, it had booked only $3.7 billion of the projected $11 billion in charges it previously said it would take in its global restructuring. 

Since then, the outbreak has spread globally, leading Ford, General Motors Co (GM.N) and Fiat Chrysler Automobiles NV (FCHA.MI), (FCAU.N) on Wednesday to announce the shutdown of their North American plants to prevent the spread of the disease among their factory workers. 

All three Detroit automakers have seen U.S. employees test positive for COVID-19, the contagious respiratory illness caused by the virus. 

Electric carmaker Tesla Inc (TSLA.O) on Thursday suspended production at its California car plant, starting March 24, to help stem the spread of the coronavirus, and added that its cash position was strong enough to navigate this period of uncertainty.


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