Ford posts profit but here's why 2020 predictions remain gloomy

Ford Motor Co on Thursday said it expects a full-year loss but added it should have ample cash on hand throughout the rest of 2020, even if global demand falls further or the Covid-19 pandemic forces more shutdowns of vehicle assembly plants.

File photo of Ford logo used for representational purpose. (REUTERS)
File photo of Ford logo used for representational purpose.

The No. 2 US automaker also said that on July 27 it repaid $7.7 billion of an outstanding $15.4 billion on its revolving credit facilities, and extended $4.8 billion of its three-year revolving credit lines.

Ford's comments came as the company posted a quarterly profit thanks to an investment by Volkswagen AG in its self-driving Argo AI unit, more than offsetting a loss caused by a coronavirus-induced production shutdown.

Trending Cars

Find more Cars

The better-than-expected results and earnings outlook sent Ford's shares up 2.5% in after-market trading.

"The strong execution enabled us to deliver much better financial results than we expected just three months ago," Chief Executive Jim Hackett said on a conference call with analysts.

German automaker VW last month closed its $2.6 billion investment in Argo, which now is valued at $7.5 billion. Each automaker has a stake of about 40% in Argo.

Ford said it expects a pre-tax profit of between $500 million and $1.5 billion for the third quarter and a loss for the fourth quarter, which features three significant product launches delayed by the shutdown earlier this year.

In April, Ford warned that its second quarter loss would more than double to more than $5 billion due to the coronavirus outbreak.

Chief Financial Officer Tim Stone said a focus on cost-cutting, a productive restart following a two-month shutdown, strong performance by the automaker's captive finance arm and a solid pricing environment for its vehicles had helped mitigate the anticipated loss.

"With Ford having passed the worst of Covid upheaval, we believe the focus now returns to the company's redesign efforts. While the product opportunity is bright with F-150 and Bronco, there is more work to be done on restructuring," Credit Suisse analyst Dan Levy said in a research note, referring to the company's popular pickup truck and the new SUV it will offer later this year.

The Dearborn, Michigan-based company said operating charges for its global restructuring would total $700 million to $1.2 billion for the year, down from $3.2 billion last year. Stone told reporters Ford's redesign was "absolutely not stalled."

Ford also said it had more than 150,000 reservations for the new Bronco, which launches in the fourth quarter. That number was above internal expectations and Ford executives said they are working to increase production further, including possibly adding another shift at a plant.

Ford ended the quarter with nearly $40 billion in cash, and said it should be able to maintain or exceed its target cash balance of $20 billion for the rest of 2020, even if global auto demand falls or if Covid-19 forces another big wave of plant closures.

Ford reported net income in the second quarter of $1.1 billion, or 28 cents a share, compared with a profit of $100 million, or 4 cents a share, a year earlier.

Excluding items, Ford posted a second-quarter operating loss of $1.9 billion, or 35 cents a share. Analysts had expected a loss of $1.17 per share.

First Published Date: 31 Jul 2020, 08:11 AM IST
Shopping Bag Shop Now
70% OFF
VENO Portable High Power 2 in 1 Car Vacuum Cleaner | USB Rechargeable Wireless Handheld Car Vacuum Cleaner Traveling, Camping Reusable and Sustainable (2 in 1 Vacuum Cleaner)
Rs. 899 Rs. 2,999
5% OFF
Godrej aer O – Hanging Car Air Freshener | Car Accessories | Cool Aqua (7.5g)
Rs. 94 Rs. 99
68% OFF
PUNZONE Car Body Scratch Remover - Scratch Repair Polishing Wax Kit Sponge Body Compound Cream Wax, Car Body Compound Scratch Remover
Rs. 289 Rs. 898
65% OFF
Ambrane 38W Fast Car Charger with Dual Output, Quick Charge 3.0 and Power Delivery, Type-C & USB Port, Wide Compatibility for Smart Phones (RAAP C38 A, Black)
Rs. 349 Rs. 999

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
By clicking "View Offers" you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.