A rock-solid balance sheet. Before the current crisis, Ford's debt load was modest and well-structured. Ford also had plenty of cash ($22.3 billion as of the end of 2019) and ample credit lines, all set aside to ensure that it could continue to fund its future-product programs through a recession.
Here are highlights:
- All factories are shut down in North America and Europe
- Take $15.4 billion line of credit
- 2019 $2.4 billion dollar dividend
A lot has changed at Ford in the last two weeks
As we've observed, the world -- and Ford's situation -- have changed a lot in the last two weeks.
- Under pressure from the United Auto Workers and lots of worried employees, Ford shut down all factories in North America and Europe, as well as several other factories in South Africa and Asia.
- Ford then suspended its dividend and drew down $15.4 billion -- every penny available -- from its existing lines of credit.
- CEO Jim Hackett told employees that cost cuts are coming, probably this week, but there will be no job cuts, at least for the time being.
- In a move that recalled Ford's quick shift to building B-24 Liberator bombers after the U.S. entered World War II, the company said it is working with 3M (NYSE:MMM) and the healthcare division of General Electric (NYSE:GE) to begin mass-producing masks, respirators, and hospital ventilators, all urgently needed by healthcare workers and first responders battling the pandemic.
- Last but not least, Ford lost its hard-won investment-grade credit rating, on concerns that the pandemic might leave the U.S. in a deep, prolonged recession.
The news of the dividend suspension was a tough development for longtime Ford investors. (Full disclosure: I'm one.) That said, it's no surprise that Ford suspended its dividend under the circumstances, given its urgent need to conserve cash. Ford paid out $2.4 billion in dividends last year; it was the right thing to do.
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