Cleveland, Ohio – Ford and General Motors are guarding their cash and say they should have enough cash and credit to survive a prolonged downturn.
Ford’s Q2 earnings were $1.1 billion, thanks to Volkswagen’s $3.5 billion investment in Argo AI, an autonomous driving venture owned 40% by Ford, 40% by VW, and 20% by other investors. Absent that gain, the company would have lost nearly $2 billion during the quarter, but company officials stressed that they’re managing conditions well to ensure a post-pandemic future.
“I could not be prouder of the Ford team’s optimism and effectiveness as we manage through this pandemic,” said President and CEO Jim Hackett. “We delivered a strong Q2 while keeping each other safe, caring for customers and neighbors, and assuring tomorrow.”
Ford ended Q2 with more than $39 billion in cash, thanks in part to $10 billion in new debt during the quarter. The company repaid some credit lines and extended others and expects to have enough resources on hand to maintain or exceed a target cash balance of $20 billion through the second half of this year, even if global demand declines or there is another major wave of pandemic-related plant closures.
GM, earlier this week, announced an $800 million quarterly loss. Given the severity of the pandemic-spurred economic downturn, cash on hand is a critical metric for the automaker, and executives say they’re protecting their reserves. GM burned through $9 billion in cash in Q2 but still has nearly $31 billion in cash and credit on hand.
“We have a track record of making swift and strategic decisions to ensure our long-term success for the benefit of all our stakeholders. We will continue to drive the necessary change throughout the company to enable growth as we prepare to deliver a world with zero crashes, zero emissions, and zero congestion,” said GM Chairman and CEO Mary Barra.
North America remained a relative bright spot for GM. Even industry sales at about an 11 million vehicle annualized rate (down from 17 million last year), GM North America broke even during the second quarter. Even a marginal increase in sales could push regional profits back into the black.
GM officials declined to offer an outlook for the remainder of 2020. At Ford, Hackett said the company expects losses going forward.
Ford CFO Tim Stone said the company isn’t expecting a meaningful improvement in the second half of the year, but it does expect the global supply base to improve, and it does not expect further COVID-19-caused production shutdowns.
In that environment, he said, the company anticipates to be profitable in the third quarter but will likely lose money in the Q4 and for the full year. Ford is launching several new vehicles toward the end of the year including a new F-150 pickup, the Mustang Mach-E electric crossover, and the Bronco Sport small SUV.
About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and Today's eMobility and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 20 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.