If Gildshire knows one thing for sure it is this. The effects of the Covid-19 virus will land on every area of life. Already there is dire financial news from the retail sector as restaurants, bars, and other gathering places are shuttered for the duration. This week, we found out that Ford is struggling financially. In a series of financial moves totaling $35 billion, the carmaker is hoping to stave off the debt collector and come out in the clear when the retail world gets back to normal. Here are the particulars. Motor1.com helped with the research.
The nuts and bolts of the loan
On Monday, the company announced a borrowing transaction of $35 billion to help it to weather the profound economic uncertainty of the COVID-19 virus. The announcement came just one day after the carmaker announced it will suspend production of vehicles at all of its United States, Canada, and Mexico-based sites through the end of the month. The purpose behind the shutdown is to protect the labor force by slowing the spread of the virus. In a related move, Ford is suspending its quarterly stock dividend, as well.
Ford is tagging two separate lines of credit. $13.4 billion is under its corporate credit arm, and $2 billion is under a supplemental credit facility. The cash will help Ford offset what it calls in a statement, “Any temporary working capital impacts of the coronavirus-related production shutdowns.” It gives Ford some additional financial flexibility in the upcoming months. Ford CEO Jim Hackett said, “the company is working to safeguard its business, workforce, customers, and dealers during this vital period.”
Suspension of the quarterly dividend
Suspending the dividend allows Ford to continue its work on new models of cars and trucks. The carmaker is in the middle of a massive restructuring. They are cutting sedans, and refocusing on SUVs, trucks, and crossovers. The automaker’s next big debut is the Bronco, which Ford said would arrive sometime this spring.
Also, Ford announced an innovative “payment relief program” for customers. Called the “Built to Lend a Hand Program,” it offers new-car buyers up to a half year of payment relief. Three months are paid by Ford, and an additional three months of deferred payments are provided by a third party. The program is for customers buying the 2019 and 2020 models. It excludes 2020 Super Duty pickups.
This move to boost Ford’s bottom line comes just as carmakers around the globe idle production. Automakers began feeling the crunch of the coronavirus in February. By late-February, organizers had canceled the Geneva Motor Show. Next to fall was the New York Auto Show. Other car shows are almost certain to follow suit.
The extra liquidity will help Ford through an uncertain time. Gildshire expects other carmakers to make similar financial gambits shortly, as the world adjusts to a new normal. For now, though, Ford is struggling financially, and the world is watching for the next domino to fall. Never in our country’s history has dominos seemed such a high stakes game.