Coronavirus: Ford sees talks with U.S. on cash for clunkers-like stimulus
Ford Motor Co. would like the U.S. government to sponsor an automotive stimulus program to help the industry get back on its feet after the coronavirus crisis abates.
“We think some level of stimulus somewhere on the other side of this would help not only the auto industry and our dealers, which are a huge part of our overall economy, but will help the customers as well," Mark LaNeve, Ford’s vice president of U.S. marketing, sales and service, said in a phone interview. “We’re in discussions about what would be the most appropriate."
Those discussions are internal at Ford for now, but are eventually expected to involve the federal government, LaNeve said a day after automakers reported their slowest monthly pace of U.S. sales in a decade. One model being considered is the 2009 “cash for clunkers" program that helped stimulate auto sales following the global financial crisis by encouraging drivers to turn in an older car in exchange for thousands of dollars toward buying a new one.
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“Cash for clunkers was very effective at that time," LaNeve said. “It would be nice to think we could have something equally as effective for 2020 when we get out of this because it was a great program."
Ford is the first major automaker to publicly float the idea of another clunkers-like program to support the automakers and suppliers that Morgan Stanley estimates employ roughly 1 million Americans. Economists say the U.S. is entering a sharp recession due to the coronavirus containment measures that have closed virtually every car assembly plant in the country.
U.S. Representative Debbie Dingell, a Michigan Democrat whose district is home to Ford’s headquarters, said a vehicle scrappage or purchase incentive to spur demand has been discussed as a possible form of relief for the industry, but said no consensus has been reached on the issue.
“It’s out there as an idea along with many other ideas," she said. “We’re working with the entire ecosystem of automakers, workers, their unions, suppliers, dealers and consumers."
Ford reported a 12% drop in first quarter U.S. deliveries on Thursday. While the automaker didn’t release monthly results, researcher Autodata Corp. said the company outsold its chief rival, General Motors Co., by about 1,700 cars and trucks.
A GM spokesman declined to say whether the company would support a push for automotive stimulus measures.
After the annualized rate of industry sales slowed to 11.4 million in March, analysts at JPMorgan Chase & Co. are warning of “material downside risk" to their expectation for April’s pace to decelerate to a rate of 6 million units.
The industry has sold more than 17 million cars and trucks the last five years.
“Without auto industry-specific stimulus, we are prepared for the right side of the ‘v’ recovery to be as low as 11 million or 12 million units for a while," Adam Jonas, an analyst at Morgan Stanley, wrote in a report Monday.
Ford shut down all its North American factories in mid-March and this week said they will remain closed indefinitely. At least two Ford workers have died from the virus, according to the United Auto Workers union.
Resuming production could be a slow process, so the automaker is working with dealers to enhance their remote-selling skills and improve “operational fitness," LaNeve said.
“The more you wind down, the harder it is to wind back up," LaNeve said. “So we want to make sure that we’re staying as fit as we can so that we can take advantage of what we hope will be increased demand on the other side."
With more than 10 million Americans having filed for unemployment benefits over just the last two weeks, Ford believes government stimulus will be necessary to jump-start auto sales.
“Eventually, I think the government will be reaching out" to automakers, LaNeve said. “If they’re able to do something, what would be appropriate? I imagine there’ll be some dialogue."
With sales slowing to a trickle in the second half of March, Ford has an adequate inventory of vehicles on hand that will last for 100 days, LaNeve said. The automaker’s sales declined less in the first quarter and in March than the industry average. But deliveries of F-Series pickups, its most profitable model line, fell 13% in the quarter.
“We feel like we’re really in a good position from a overall inventory standpoint," LaNeve said. “We think we’ll be in a good position when the plants come back up and the economy begins to recover. I have no idea when that’ll be."