In a preliminary release of its first-quarter earnings, Ford Motor (F 2.27%) said that it expects to post an adjusted pre-tax loss of about $600 million -- and that it has enough cash to last at least until October, even if most of its factories have to stay closed.
At first glance, the news is grim. But most of it is about what we expected -- and the news about Ford's cash-burn rate should give Ford investors some reassurance.
The (preliminary) raw numbers
Here are the key figures shared by Ford in its Monday-morning preliminary earnings statement.
- Revenue in the first quarter was about $34 billion, down about 16% from $40.3 billion in the first quarter of 2019.
- Ford's first-quarter vehicle wholesale shipments were down about 21% from 1.425 million a year ago.
- Adjusted earnings before interest and tax (adjusted EBIT) were roughly negative $600 million (a loss), versus adjusted EBIT of (positive) $2.4 billion a year ago.
- Ford will take about $300 million in one-time charges in the first quarter.
- Ford had about $30 billion in cash as of April 9, including the $15.4 billion that it drew down from its credit lines in March.
- Ford Credit, the company's financing subsidiary, had $28 billion in liquidity as of the end of the first quarter, well above its $25 billion liquidity target.
Again, these are preliminary numbers, meaning that they don't yet include the effects of taxes and haven't been reviewed by Ford's auditors. Think of them as estimates for now.
Ford will report its complete first-quarter results on April 28.
Ford's CFO: We have enough cash to last awhile
Here's the big news: Ford wants investors to know that it has enough cash to last for quite a while, even if most of its factories have to stay closed.
Ford closed nearly all of its factories around the world in the first quarter, as the new coronavirus spread from China to Europe and North America. Because Ford (like most automakers) books revenue when vehicles are shipped to dealers, the factory shutdowns dropped its revenue to nearly zero.
As of April 13, only Ford's factories in China have reopened, Ford said. But CFO Tim Stone said that even if Ford can't reopen elsewhere, that $30 billion is enough to last at least through the third quarter.
Ford has already taken steps to slow its cash-burn rate. It suspended its dividend and share-repurchase programs, said that it will defer portions of its executives' salaries, and cut capital expenditures.
Stone said that Ford could take more steps to reduce its burn rate further. He also said that Ford might look into raising additional cash. But even if it doesn't do either, and can't reopen its factories outside of China, it'll be able to keep running at least through the end of September.
What's ahead for Ford
Ford said that it's working on a plan to restart production in phases, starting before the end of June, with enhanced safety measures in place to protect workers. That last point is significant: Ford will need to convince labor unions in the U.S., Canada, and Europe that it's safe for their members to return to work.
As with so many other things right now, it's hard to say how and when Ford will be able to recover from the impact of the COVID-19 pandemic. But auto investors can take some comfort from the fact that Ford has enough cash to keep the lights on for a while, even if its factories stay closed much longer than most of us expected.