In the second quarter, Ford Motor Company expects to lose about $5 billion on an operating basis, CFO Timothy Stone announced on a Tuesday earnings call. Even with the operating loss, the auto giant has enough money to last the rest of 2020.
Stone called the economic landscape "too ambiguous" for Ford to provide a full-year 2020 earnings forecast. In the meantime, the company will lean on its liquidity and focus on its balance sheet. In Q1, Ford borrowed $15 billion from existing credit facilities and raised $8 billion in bond sales, according to Barron's.
The $5 billion loss is twice as large as analysts expected, Barron’s reported.
Stone summarized a list of factors comprising the $5 billion loss estimate, including higher freight costs, lost variable profit on lower wholesale shipments, and the cost of Ford's enhanced efforts to protect employee health and safety.
Ford is "thoroughly assessing and aggressively addressing" operations in search of cash preservation opportunities, he said. That includes capital spending reductions and non-essential expenditure elimination.
"We've taken decisive actions to lower our costs and capital expenditures and been opportunistic in strengthening our balance sheet and optimizing our financial flexibility," Stone said on the call. "We believe the company’s cash is sufficient to take us through the end of the year, even with no additional vehicle wholesales or financing actions."
In mid-March, most global automakers halted manufacturing, in an effort to flatten the Covid-19 new infection curve, Barron's reported. It remains unclear how capacity will return, from workflow to warehouse layouts, once the risk resides.
"Part of skillfully managing through this crisis is having a well thought-out protocol for back to work," Ford CEO Jim Hackett said on the earnings call. "And we did this for China, and I'm pleased that earlier today, we announced we’ll restart our European manufacturing production with enhanced employee protection protocols in place."
Hackett said Ford's China operations are currently running at nearly 90% of capacity, with modified shift patterns in plants to minimize chances of infection. Hackett plans to "export" these measures to the U.S., once it’s safe for employees to return to the Dearborn, Michigan manufacturing headquarters.
In recent weeks, Ford has slashed costs across the business to survive the mandated shutdown, including cutting executive and high-level employee salaries. In an earlier conference call with reporters, Stone said Ford would restart U.S. production "as soon as practicable," but declined to provide a timeline, Reuters reported.
The company expects to spend between $700 million and $1.2 billion on global restructuring in 2020.
"We remain committed to a strong balance sheet and [to] doing what's right to preserve our future, which is why we've been proactive in charting our course and maximizing liquidity during this uniquely uncertain time," Stone said.
"I'm optimistic we'll be better positioned than ever on the other side of this to achieve our long-term potential," he said.