Source: Ford Motor Co
By Ben Klayman
DETROIT (Reuters) – Ford Motor Co announced plans on Thursday to shore up its finances amid the coronavirus pandemic, aiming to generate more cash by resuming production next month of its most profitable vehicles while saving money through more cost cuts.
To generate more cash, the No. 2 U.S. automaker was poised to restart production at some plants in North America as early as April 6, bringing back such profitable vehicles as its top-selling F-150 full-sized pickup, the Transit commercial van and SUVs.
Meanwhile, to further conserve cash a day after Standard & Poor’s downgraded the Dearborn, Michigan-based company’s debt to “junk” status and warned more downgrades could be necessary, Ford also announced belt-tightening moves, including temporarily cutting the salaries of top executives.
“The actions we’re taking now are wide-ranging and substantial,” Chief Executive Jim Hackett told employees in an email early on Thursday. “We hope they will be enough to give Ford the financial flexibility to ride out the economic and business effects of the coronavirus.”
The coronavirus pandemic, which has killed more than 21,000 people globally, has forced the shutdown of auto plants around the world as companies attempt to curtail the spread of the disease among factory employees.
The outbreak has put pressure on companies, including Ford, which previously drew down credit lines to build its cash position and suspended its dividend.
The U.S. Senate on Wednesday passed a $2 trillion economic rescue package to help unemployed workers and companies, including the auto industry, hit hard by the outbreak.
President Donald Trump, concerned about the economic repercussions of an extended shutdown, has said he wants America to get back to business by Easter, or April 12, suggesting some efforts to slow the spread of the outbreak will no longer be needed by then.
To get more cash coming in, Ford said Thursday it would restart key plants, while introducing additional safety measures to protect returning workers from the coronavirus.
Ford said it would detail the additional measures later.
Ford also took additional moves to conserve cash, announcing its top 300 executives would defer 20% to 50% of salaries for at least five months starting May 1, with the executive chairman deferring his entire salary. Hackett will defer half his salary.
Hackett said Ford’s goal was to avoid layoffs during the crisis, but warned that could change if the impact of the outbreak is more severe than anticipated.
Other actions Ford is taking to conserve cash include deferring salary increases more broadly, suspending overtime for salaried employees and freezing hiring in non-critical areas, Hackett said.
However, Ford employees will continue to get healthcare coverage and those exposed to the virus and placed in quarantine will get paid time off, he added.
General Motors Co and Fiat Chrysler Automobiles NV previously said they would shut down their North American operations through March 30 and then reassess after that.
“The situation is fluid and can change week to week,” GM spokesman Jim Cain said on Thursday. “We don’t have firm return-to-work dates at this time.”
FCA spokeswoman Jodi Tinson said on Thursday the Italian-American automaker was evaluating the situation.
To shore up its balance sheet, FCA said it had entered a new credit facility for 3.5 billion euros. That is on top of credit lines it already had for 7.7 billion euros.
UAW President Rory Gamble said on Tuesday in a letter to union members that Ford and FCA had no plans to reopen manufacturing operations on March 30. The UAW has said three union members who worked at FCA plants have died due to the coronavirus.
Michigan Governor Gretchen Whitmer issued an order on Monday barring non-essential businesses from operating until April 13. A spokeswoman for Whitmer was previously unable to clarify whether auto production was considered essential or not.
Japanese automaker Honda Motor Co Ltd on Thursday said it would resume work at its U.S. and Canadian plants on April 7 after extending its shutdown beyond March 30.
Ford plans to begin production on one shift at its Hermosillo, Mexico, assembly plant, where it builds the Ford Fusion and Lincoln MKZ sedans.
It will restart production on April 14 at its Dearborn plant that builds the F-150 and a Kentucky plant that makes the Super Duty version of the pickup as well as the Ford Expedition and Lincoln Navigator SUVs.
The Ford Transit van line at its Kansas City, Missouri, plant, the Ohio plant that builds Econoline vans and heavy duty trucks, and several stamping, transmission and parts plants also will restart on that day.
Ford shares were up more than 2.7% in morning trading.
Additional reporting by Sanjana Shivdas in Bengaluru; Editing by Shinjini Ganguli and Bernadette Baum.