Forget the Dow: Coronavirus Could Send Ford Stock to Zero

[spin_dry]

• Ford Motor Company is in the middle of a massive restructuring. And China is the key to the automaker’s transformation.
• The coronavirus has sent Chinese auto sales into freefall, and the United States could be on the verge of recession.
• With deteriorating margins and massive debt, the legendary American automaker is running on fumes. It may not make it to the finish line.

The coronavirus pandemic is sweeping throughout the world, and pummeling the Dow Jones Industrial Average so hard it might close the stock market. Its next victim may be Ford Motor Company (NYSE: F).

The company’s expensive restructuring program is failing to show results. And as the coronavirus sends the global economy careening towards recession, the American automaker is unlikely to survive.

Ford’s stock has been in freefall since the start of the year. Could it hit zero? | Source: Ycharts

Ford’s China sales are incomplete freefall. And the latest data out of China suggests this weakness will continue in 2020. With U.S. and European sales also stagnant, Ford will have trouble meeting its titanic debt obligations as margins deteriorate.

Ford’s Fourth Quarter Results Were an Omen for Disaster

Anyone who expected Ford’s restructuring to deliver better margins and profitability was sorely disappointed.

The company’s fourth-quarter resultrevealed that the company achieved nothing despite brutally laying off thousands of employees and discontinuing several beloved vehicle brands.

Ford’s performance is getting worse by the quarter:

• In North America, wholesale unit sales fell 8% from 738,000 to 681,000. Revenue fell 2% from $25.9 billion to $25.3 billion.
• In Europe, wholesale units fell 4% from 361,000 to 346,000. Revenue fell 4% from $7.4 billion to $7.1 billion.
• In China, Ford saw wholesale units decline 7% from 171,000 to 159,000. Revenue collapsed by a staggering 38% from $1.6 billion to $1 billion.

As if the top-line performance wasn’t bad enough, Ford’s bottom line is also getting battered. In North America, EBIT margins fell 64% to 2.8%, and total EBIT declined by 67% to $500 million.

Another quarter of declines like this could send Ford into negative cash flow territory, and that would call its solvency into question.

Coronavirus – the Final Straw for Ford’s Struggling Business?

The Wuhan coronavirus could be the death knell for Ford’s struggling business. The disease, which has sickened over 100,000 people around the globe, is dampening consumer spending and may send the global economy into recession.

So far, the pain is worst in China.

According to the Wall Street Journal, 2020 is shaping up to be the worst year for car manufacturers since 2009. That was the year GM and Chrysler filed bankruptcy amid the global financial crisis.

Ford escaped unscathed in 2009, but it may not be so lucky this time.

According to China’s passenger car association, Chinese retail auto sales sank by 80% in February. This follows a 20% plunge in January before many of the coronavirus lockdowns took effect.

Now that the coronavirus is spreading around Europe and the United States, Ford can expect substantial declines in all its major markets. Italy recently decided to lock down most of its northern regionafter over 5,800 infections were reported in the country. And American officials have declared states of emergency in several key cities as caseloads top 550.

Can Ford Survive Another Recession?

Ford’s long-term debt has soared over the last ten years. | Source: Ycharts

We won’t know if the economy is in recession for several months. But if the auto industry is any indicator, we may already be in one. Auto sales are a leading economic indicator, and they tend to slide in the period leading up to a recession.

U.S. auto sales have been stagnant for several years, and the coronavirus may be the catalyst that sends them tumbling downwards.

With $14.6 billion of automotive debt coupled with $140 billion of Ford credit debt, Ford is a highly leveraged company. It will have a hard time meeting its obligations when cash flow from the automotive segment goes negative and defaults start to pile up in its credit segment.

Remarks from Ford’s management suggest that they see the writing on the wall. Jim Farley, the company’s COO, had this to say at an investor conference in New York:

Everyone at Ford Motor Co. knows the situation we’re in. I can see it on the face of my colleagues, and it takes me back to about 10 years ago.

A decade ago, Ford hit its all-time low of $0.67 per share. This time it could hit zero.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.

This article was edited by Josiah Wilmoth.

[ArcticCrusher]

Run Spin Run.

[f7ben]

Just bail them out and move on!!!

[Redheaded Stepchild]

1 minute ago, f7ben said:

Just bail them out and move on!!!

Thanks Obama.

[racer254]

The sky is falling.  Look at chicken little go.

[Jimmy Snacks]

16 minutes ago, ArcticCrusher said:

Run Spin Run.

 

8 minutes ago, racer254 said:

The sky is falling.  Look at chicken little go.

It’s a current event you fucking idiots....goddamn this place needs to be renamed.

[Anler]

Maybe Elon can buy them. 

[racer254]

3 minutes ago, Jimmy Snacks said:

 

It’s a current event you fucking idiots....goddamn this place needs to be renamed.

LOL  It's a fucking opinion piece.  "Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. "

[Jimmy Snacks]

3 minutes ago, racer254 said:

LOL  It's a fucking opinion piece.  "Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. "

So fucking what....it’s still a Current event you dolt.

[BOHICA]

If Tesla has taught us anything it is you don’t need to turn any profits to be successful.....  you just have to dream big.

[ford_428cj]

Somebody is gonna lose some chiclets!!

[Edmo]

Funny the opinion piece doesn’t mention the 37 billion Ford has in cash. They can ride this out at least a few more years.

[spin_dry]

3 hours ago, Jimmy Snacks said:

 

It’s a current event you fucking idiots....goddamn this place needs to be renamed.

They get so mad. 

[spin_dry]

27 minutes ago, Edmo said:

Funny the opinion piece doesn’t mention the 37 billion Ford has in cash. They can ride this out at least a few more years.

https://www.google.com/amp/s/www.cnbc.com/amp/2019/11/25/at-ford-37-billion-in-the-bank-and-strapped-for-cash.html

[Mileage Psycho]

3 hours ago, racer254 said:

LOL  It's a fucking opinion piece.  "Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. "

 

29 minutes ago, Edmo said:

Funny the opinion piece doesn’t mention the 37 billion Ford has in cash. They can ride this out at least a few more years.

Hmmm

 

Quote

 

There’s a sense of urgency and crisis at Ford as stock hits 10-year low, exec says

PUBLISHED WED, FEB 26 20209:45 AM ESTUPDATED WED, FEB 26 202011:40 AM EST

There’s a sense of urgency and crisis at Ford Motor that is reminiscent of the automaker’s near-bankruptcy during the Great Recession, according to its incoming chief operating officer.

“Everyone at Ford Motor Co. knows the situation we’re in,” Jim Farley, a 13-year veteran of the company, told investors Wednesday at a Wolfe Research conference in New York. “I can see it on the face of my colleagues and it takes me back to about 10 years ago.”

Putting a positive spin on it, Farley said such situations are when the company operates at its best with decisive actions and plans, which he will lead along with President and CEO Jim Hackett.

Farley’s comments follow Ford stock closing Tuesday at $7.23 per share – the lowest closing price since 2009. The shares in morning trading Wednesday were up more than 2% to about $7.40.

Ford, according to Farley, who becomes COO effective March 1, plans to accelerate a “double transformation” aimed at restructuring the company’s traditional automotive operations while entering emerging segments such as electric and autonomous vehicles.

“We have to fix a number of things,” he said, citing delayed launches and the company’s recent $5 billion in expenses to cover warranties. “Our warranty spending is a big opportunity for us.” He said the company has a plan to address the costs without citing specific examples.

Ford, which has been criticized for its lack of transparency, will offer a “concrete plan” with benchmarks, according to Farley. He did not disclose a time frame for the plan. The company is currently in the midst of an $11 billion global restructuring, which is expected to last through the early 2020s.

Part of those accelerated plans, Farley said, will be on growing the company’s global fleet business and data analytics. He also noted building customer loyalty with better connected vehicles and new technologies, citing Tesla as a prime example.

“We have to accelerate the sense of urgency,” he said. “I think it’s there for natural reasons because of the stock price, our financial performance, the personnel moves we’ve made ... but it’s not enough.”

Ford earlier this month reported a $1.67 billion loss during the fourth quarter and missed Wall Street earnings expectations on increased pension contributions and higher North American warranty and labor costs. It’s projected 2020 earnings of between 94 cents and $1.20 a share, or adjusted earnings before interest and taxes of between $5.6 billion and $6.6 billion, also disappointed investors.

https://www.cnbc.com/2020/02/26/theres-a-sense-of-crisis-at-ford-as-stock-hits-10-year-low-exec-says.html

 

 

[Mileage Psycho]

3 minutes ago, spin_dry said:

https://www.google.com/amp/s/www.cnbc.com/amp/2019/11/25/at-ford-37-billion-in-the-bank-and-strapped-for-cash.html

It's sad you even have to post that, even in light of him having the IQ of a grapefruit.

[Edmo]

28 minutes ago, Mileage Psycho said:

It's sad you even have to post that, even in light of him having the IQ of a grapefruit.

The auto industry is like a roller coaster ride, having spent most of my years in the “D” I know this. If I had a nickel for every time ford has been going out of business...

[Anler]

1 hour ago, Edmo said:

Funny the opinion piece doesn’t mention the 37 billion Ford has in cash. They can ride this out at least a few more years.

Yeah but if you can beg the tax payer for the money why use your own?

[racer254]

12 hours ago, Anler said:

Yeah but if you can beg the tax payer for the money why use your own?

Takes 2 to tango.  Last time seems many of the people were for the bailout....IDIOTS, but they got convinced.  Remember, china was going to steal our secrets and they were going to buy GM.  Again, easily manipulated minds believed it.

[Skidooski]

 Ford stock in the shitter 

[GGNHL]

15 hours ago, Mileage Psycho said:

 

Hmmm

 

 

If they didn't build such POS vehicles then their warranty costs wouldn't have been so large, I'm happier every day I decided to buy a Toyota.

[Jimmy Snacks]

2 minutes ago, GGNHL said:

If they didn't build such POS vehicles then their warranty costs wouldn't have been so large, I'm happier every day I decided to buy a Toyota.

Uh-oh....

 

[Angry ginger]

    I just bought another Ford.  I never ever would have thought I would be a 2 Ford family.   After 50 years of having GM's in the household i haven't had one for 2 years now.  2 Fords,  Toyota, Mazda and a Kia.  

[Edmo]

6 minutes ago, Angry ginger said:

    I just bought another Ford.  I never ever would have thought I would be a 2 Ford family.   After 50 years of having GM's in the household i haven't had one for 2 years now.  2 Fords,  Toyota, Mazda and a Kia.  

You need 5 cars? What ya get?

[Angry ginger]

17 minutes ago, Edmo said:

You need 5 cars? What ya get?

Mustang GT vert

2 kids, wife and myself and a toy.  I will prob dump the explorer this winter and drive the Kia while my sons in Italy for the spring semester.  Both kids with their work schedules in the summer need a car but sucks hers sits there 8 month out of the year.  And insurance gave a whopping $100 break with her 800 miles away.  

Edited March 11, 2020 by Angry ginger