Ford suspends dividend, withdraws 2020 guidance as production halts
Ford Motor Co. on Thursday said it was suspending its quarterly dividend and withdrawing its 2020 financial guidance amid the coronavirus pandemic.
The suspension of the 15-cent payout — a measure CEO Jim Hackett has said he wished to continue — could save the automaker billions in cash. The company is beginning to idle plants in Europe and North America because of the virus, which also is sinking demand.
“Like we did in the Great Recession, Ford is managing through the coronavirus crisis in a way that safeguards our business, our workforce, our customers and our dealers during this vital period,” Hackett said in a statement.
Ford's 2020 guidance did not factor in the virus because of its uncertainties. But investors still were disappointed with the forecast of between $5.6 billion and $6.6 billion in earnings before interest and taxes. It made $6.4 billion in 2019. Shares soon dropped to a one-year low following the report. They were falling more than 2% Thursday morning on the news, putting its price at the lowest since 2009. The Dearborn automaker will share a new guidance when it reports first-quarter results on April 28.
Cutting the dividend will provide the company "near-term financial flexibility," the company said, as it prepares major launches, including the Mustang Mach-E SUV and redesigned F-150 pickup this year and the Bronco off-road SUV in early 2021. In January 2012 following a five-year hiatus, Ford resumed distributing quarterly dividends.
"We like to return value to shareholders," Hackett said during the 2019 fourth-quarter earnings call in February. "The dividend's been a legendary value creator at Ford. ... I want to continue that because we said we could do it and right now we can."
The automaker said at the end of 2019, it had $22 billion in cash and $35 billion in liquidity. That is more than the $20 billion and $30 billion goals it had set for heading into an economic downturn. But those goals had been set so the company "could be in a position to invest in our long-term, invest in the customer experience and fund the dividend for shareholders," Tim Stone, Ford's chief financial officer, said during the fourth-quarter earnings call.
Ford also is borrowing more than $15 billion of total unused funds against two lines credit. That includes $13.4 billion under its corporate credit facility and $2 billion under its supplemental credit facility. The money will offset costs of the halted production.
Meanwhile, the company is offering six months of relief to new-car buyers to boost demand. Ford is offering to pay for the first three months of a new-car purchase, and customers can defer payment up to three more. Customers who buy a 2019 or 2020 model-year vehicle excluding 2020 Super Duty trucks and finance through Ford Credit may be eligible.