Dearborn — Ford Motor Co. took a $1.9 billion hit to its pretax earnings for the second quarter during the second quarter — but that’s far better than $5 billion the automaker had warned it might lose.
Ford said it burned through $5.3 billion in the second quarter amid the coronavirus pandemic that kept plants closed. The Blue Oval’s revenue was down to $19.4 billion from $38.9 billion in the second quarter of 2019, according to its quarterly earnings report.
After a $2 billion net loss in the first quarter, the automaker had signaled that it expected the second quarter — which bore the brunt of an industrywide-wide North American manufacturing shutdown that went through mid-May — to be even worse. At that time, Ford projected it would lose $5 billion in the April through June period.
“I could not be prouder of the Ford team’s optimism and effectiveness as we manage through this pandemic,” Ford President and CEO Jim Hackett said in a statement. “We delivered a strong Q2 while keeping each other safe, caring for customers and neighbors, and assuring tomorrow.”
The automaker has taken a number of steps to shore up its balance sheet and preserve cash to get through the crisis, including drawing down $15 billion from existing credit lines, issuing $8 billion in bonds, temporarily suspending its quarterly dividend and share buybacks, lowering operating costs, reducing capital expenditures and deferring portions of executive salaries.
The Blue Oval’s sales in the second quarter were down 33% from the previous year, it reported earlier this month. Sales for all of the Detroit Three were down by at least one-third.
One bright spot for U.S. automakers, including Ford, is that retail sales of profit-rich SUVs and trucks have held up relatively well. Sales of Ford’s F-Series truck lineup were down only 22.7%. And Ford’s Explorer SUV was the best-selling midsize SUV in the second quarter, posting a 12% sales increase over last year.
While forecasting a “dismal” second quarter for Ford, industry analysts noted other bright spots for the automaker, including upping its average transaction price and increasing its market share, to 14.9%.
But the onset of the pandemic amid an $11 billion global restructuring by Ford and ahead of numerous new product launches “put a damper on what should have been flashy and exciting new introductions,” said Jessica Caldwell, executive director of insights for Edmunds.com Inc.
“After struggling with an aging product lineup for quite some time, the upcoming year was poised to be a bright one for Ford,” she said. “And although the product launches are still happening, it’s unfortunate that they’re happening amidst uncertain consumer demand and the other challenges that COVID-19 has brought to Ford’s production facilities around the world.”
Key to Ford’s financial recovery will be numerous new products that are slated to roll off assembly lines in the coming months, including its next-generation F-150 scheduled to go on sale later this year and the much-anticipated Bronco SUV that will return to production next year after a nearly quarter-century absence. Analysts and investors have said it is critical these launches go off without a hitch — especially after the botched launch of the 2020 Explorer, which was delayed by months with faulty seats, loose wiring harnesses and digital displays with buggy software.
Tim Stone, Ford’s chief financial officer, said the automaker has gotten more than 150,000 orders for the Bronco, which “(exceeds) our optimistic expectations.”
It is crucial for Ford to have a smooth rollout of the Bronco, said David Kudla, CEO of Grand Blanc-based financial advisory firm Mainstay Capital Management. “After a bruising Explorer launch last year, the execution of the Bronco, one of the most anticipated and talked about product releases for the company in recent memory, has got to be flawless,” he said in a pre-earnings note.
And, because Ford is in the middle of a global overhaul of its business, it “will continue to face obstacles, even more so than other automakers,” he said.
The Detroit Three have been scrambling to fill dealership inventories, which were depleted during the production shutdown, as retail demand — buoyed by significant incentives — rebounded more robustly than had been expected at the outset of the pandemic. All three have returned to pre-shutdown production levels, but have struggled with high rates of absenteeism and other disruptions at manufacturing plants.
At the end of the second quarter, Ford had a 75-day supply of vehicles on dealer lots, down 5.2% from last year, according to Edmunds data. This month, Ford has more than 90 days’ supply, according to Cox Automotive.
Looking out at the rest of the year, analysts are forecasting further recovery in the vehicle market, but an uncertain one, given the unknowns surrounding the economy and the trajectory of the coronavirus.
GM on Wednesday reported that in the second quarter, it burned through $7.8 billion and lost $758 million in net income on revenue of $16.8 billion. The Detroit automaker outlined plans to get back on track in the third and fourth quarters by halting salary cuts, paying back by year’s end a $16 billion revolving credit line and generating $7 billion to $9 billion in cash. GM’s liquidity was $30.6 billion, as of the end of June.
Fiat Chrysler Automobiles NV will report its second-quarter financial results Friday.
jgrzelewski@detroitnews.com
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