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Old 03-20-2020, 07:38 AM   #1
AVANTI R5
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Default Ford’s Suspended Dividend Tests Family’s Patience With Hackett

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Ford Motor Co.’s Chief Executive Officer Jim Hackett was already under pressure before the coronavirus pandemic upended economies worldwide. But after suspending the dividend payment that management had said was sacrosanct, he’s now testing the faith of the founding family that has supported him.

Executive Chairman Bill Ford has not been shy about stressing the importance of the stock and dividend to his clan. “Most of our net worth is tied up in the company,” he said at Ford’s 2017 annual shareholders meeting. A year later, he joked about his family’s keen interest in the dividend when reading a question from an investor.

“Why is the company so stingy with paying dividends?” Ford read during the webcast shareholder meeting. He quipped: “Was that sent in by a member of the Ford family?”

But now, with the automaker halting production at its North American factories after shutting plants in Europe earlier this week, Hackett said he has no choice but to conserve cash and offset a financial hit one analyst estimates will cost the company $1 billion in earnings before interest and taxes.

“While we obviously didn’t foresee the coronavirus pandemic, we have maintained a strong balance sheet and ample liquidity so that we could weather economic uncertainty and continue to invest in our future,” Hackett said in a statement.

Bunker Mode

To give the company financial breathing room and keep important new model launches rolling, the automaker also is fully drawing down $15.4 billion from two credit lines and retracting earnings guidance it had given investors on Feb. 4.

“They maxed out their credit line, so they have well over $30 billion in cash now and that is a massive hoard,” said David Whiston, an analyst with Morningstar in Chicago. “That, along with the dividend suspension, basically puts Ford in lockdown mode. They’re going into their bunker.”

The unprecedented circumstances should buy Hackett some time and patience from the Ford family, which derived annual income of tens of millions a year from the 15-cent quarterly payout. While all common shareholders receive the dividend, the progeny of Henry Ford hold a special class of stock that gives them 40% voting control of the company.

Ford last suspended its dividend in 2006 before reinstating it five years later. That included a period when U.S. auto sales plunged to 10.4 million in 2009.

Stock Under Pressure

When Ford restored the payout, management pledged it had re-engineered the company so it could maintain the dividend through the next downturn.

“Ford has said many times, even before Hackett became CEO, that the dividend would be safe if sales went back to ‘09 levels,” Whiston said. “And even the lowest projections as of mid-March are not for ’09 levels in 2020.”

The dividend reversal puts even more pressure on Hackett, who has faced questions from Wall Street about his job security.

Ford shares fell as much as 8.9% shortly after the start of regular trading. The stock, which as of early this month had fallen further under Hackett than his predecessor, closed Wednesday at the lowest since April 2009.

Hackett, 64, took the steps to bulk up on cash hours before Ford planned to halt output at all North American factories through March 30 for deep cleaning. The shutdown will cost the company $1 billion in lost earnings before interest and taxes, Michael Ward, an analyst at Benchmark Co., estimated in a note to clients on Thursday.

Ford will lose the equivalent of 140,000 vehicles worth of production during the 11-day shutdown, or about $5.3 billion of revenue, he wrote. Ward lowered earnings estimates for the carmaker, which he rates a hold.

Analysts have speculated in the wake of the virus that factory closings and the global slowdown of vehicle purchases probably would force Ford management’s hand. Then-CFO Bob Shanks said in August 2018 that reports the dividend was at risk were “baseless.”

“The dividend’s been a legendary value creator at Ford,” Hackett said Feb. 4. “I want to continue that, because we said we could do it, and right now we can.”

Joseph Spak, an analyst at RBC Capital Markets, predicted a dividend cut last week, writing in a report that the $2.4 billion annual cost of the payments would be too much of a burden for a company that’s repeatedly come up short with its earnings and just issued a disappointing profit forecast for the year.

Heir Apparent

In an effort to change that negative dynamic, Hackett recently shook up management by appointing Jim Farley chief operating officer and gave him a mandate to accelerate an $11 billion restructuring. But credit-ratings companies have raised concerns about the efficacy of those efforts, with Moody’s Investors Service downgrading Ford to junk and S&P Global Ratings cutting the company to the lowest rung of investment grade rating last year.

Ford’s board of directors last week cemented Farley’s status as heir apparent to Hackett by disclosing it had arranged a $2.5 million stock award for the 57-year-old if he is not named the next CEO.

Bill Ford and his family have stood by Hackett through setbacks and struggles. And now they’re likely hoping this dividend suspension is short-lived.

“I would not be shocked if the dividend comes back as soon as this year,” Morningstar’s Whiston said. “But that’s certainly not a base-case expectation because we just don’t have visibility on anything in U.S. autos.”
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Old 03-20-2020, 05:29 PM   #2
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Well if the oil market stays collapsed like this then they may just sell a lot of trucks. But if this virus outbreak persists, which it will, then a lot of people will not be able to buy anything let alone car and gasoline.

BTW, I like what they have done with the updated Explorer.
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Old 03-20-2020, 10:22 PM   #3
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Originally Posted by Scooby-Doode View Post
Well if the oil market stays collapsed like this then they may just sell a lot of trucks. But if this virus outbreak persists, which it will, then a lot of people will not be able to buy anything let alone car and gasoline.

BTW, I like what they have done with the updated Explorer.
They cut the passenger vehicle lineup in the US to dump into EV development for trucks, suv, and cars. Cutting the dividend makes sense, most companies are doing it and if people point fingers saying “see, Ford is going to go under. They are cutting dividends.” Then I ask them to look at other autos who currently pay dividends, if at all and compare.

Ford is smart. They might not have the most exciting line up but they are financially smart (see Great Recession). Ford, with the exception of EV, has typically been ahead of the curve for autos, especially domestics.

If the pandemic goes on for an extended period of time, yes, people will struggle with paying for gas. That said, they sure as **** won’t have the disposable income to go out and buy an EV just to save on gas. They likely wouldn’t be approved for a loan either.

Ford, whether you like, hate or indifferent has always had a smart business and financial model. I don’t have brand loyalty but I can respect a smart business. Ford has that.
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Old 03-20-2020, 11:29 PM   #4
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Ford is gona be just fine through all this no matter how bad it gets. Not trying to get political, but honestly, there is no way Trump lets them fail in an election year. They're getting a bailout if they need it.
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Old 03-21-2020, 09:40 AM   #5
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Originally Posted by godfather2112 View Post
They cut the passenger vehicle lineup in the US to dump into EV development for trucks, suv, and cars. Cutting the dividend makes sense, most companies are doing it and if people point fingers saying “see, Ford is going to go under. They are cutting dividends.” Then I ask them to look at other autos who currently pay dividends, if at all and compare.

Ford is smart. They might not have the most exciting line up but they are financially smart (see Great Recession). Ford, with the exception of EV, has typically been ahead of the curve for autos, especially domestics.

If the pandemic goes on for an extended period of time, yes, people will struggle with paying for gas. That said, they sure as **** won’t have the disposable income to go out and buy an EV just to save on gas. They likely wouldn’t be approved for a loan either.

Ford, whether you like, hate or indifferent has always had a smart business and financial model. I don’t have brand loyalty but I can respect a smart business. Ford has that.
Agreed, unlike Government Motors and others companies who gladly stick their hand out for a tax payer bail out. Just last night I saw a Chevy ad touting 84 months of financing. GTHO here...
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Old 03-21-2020, 10:50 AM   #6
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Agreed, unlike Government Motors and others companies who gladly stick their hand out for a tax payer bail out. Just last night I saw a Chevy ad touting 84 months of financing. GTHO here...
I'd like a 2SS 1LE Camaro. They should offer $20,000 off so I can buy one.
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Old 03-23-2020, 12:06 PM   #7
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I'd like a 2SS 1LE Camaro. They should offer $20,000 off so I can buy one.
its happened before so keep your eyes open and bargain hard. If you have reliable income or cash think you can grab one $20k off Pickups too !
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Old 03-23-2020, 12:12 PM   #8
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Ford stock today ( its rarely above $10,) $4.13 and falling, they may be forced to merge with another co like VW.
Ford was dumb not to take free stupid money. Banks paid theirs back to govt but GM and FCA did not. FCA incorporated in UK and no longer the Chrysler who they gave that money to. Can't get back the money form GM either but trust me Gen X and Y get the tab in future poorly run great giveaway taxpayer money. https://www.google.com/search?client...d&q=ford+stock
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Old 03-23-2020, 12:46 PM   #9
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I went and looked at a GMC Sierra 1500 diesel on Saturday and the guy told me they sold 7 trucks that day and 4 on Friday. He said they didn't anticipate the amount of people who were going to take advantage of GM's 84 months 0% interest financing and 120 days deferred payments.
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Old 03-23-2020, 01:45 PM   #10
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That's a bit of a bummer. In any case, it's white out snowing conditions right now so I'm back on the STI train. It's way less fast, track capable, and advanced than a 1LE but the AWD makes it SO MUCH MORE practical.
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Old 03-23-2020, 01:48 PM   #11
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It's basically not worrying about now and just shoving any liability down the road in hopes everything will be fine. In the meantime, the truck depreciates. At least the diesels do hold value.
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Old 03-23-2020, 03:01 PM   #12
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Originally Posted by Masterauto View Post
Ford stock today ( its rarely above $10,) $4.13 and falling, they may be forced to merge with another co like VW.
Ford was dumb not to take free stupid money. Banks paid theirs back to govt but GM and FCA did not. FCA incorporated in UK and no longer the Chrysler who they gave that money to. Can't get back the money form GM either but trust me Gen X and Y get the tab in future poorly run great giveaway taxpayer money. https://www.google.com/search?client...d&q=ford+stock
Why would ford need to merge? If your statement is simply because of stock price, that’s not how things work. Why were they stupid to not take money? They didn’t need it, and they would have had to pay it back. I think you’re missing a lot here.


Quote:
Originally Posted by Waddlz View Post
I went and looked at a GMC Sierra 1500 diesel on Saturday and the guy told me they sold 7 trucks that day and 4 on Friday. He said they didn't anticipate the amount of people who were going to take advantage of GM's 84 months 0% interest financing and 120 days deferred payments.
I have been half tempted to trade the M2 and F150 in on a new GMC truck. However, I’d really prefer a Ford and am waiting to see if they do anything similarly crazy.
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Old 03-23-2020, 04:38 PM   #13
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Quote:
Originally Posted by godfather2112 View Post
Why would ford need to merge? If your statement is simply because of stock price, that’s not how things work. Why were they stupid to not take money? They didn’t need it, and they would have had to pay it back. I think you’re missing a lot here.




I have been half tempted to trade the M2 and F150 in on a new GMC truck. However, I’d really prefer a Ford and am waiting to see if they do anything similarly crazy.
Yeah I really liked it, but even with discounts and stuff they wanted 51k for it.

I was tempted to offer then 45k OTD with my trade but I really dont NEED a new truck
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Old 03-23-2020, 04:54 PM   #14
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Yeah I really liked it, but even with discounts and stuff they wanted 51k for it.

I was tempted to offer then 45k OTD with my trade but I really dont NEED a new truck
Maybe if I’m patient enough, Ford will have their EV truck with 0% interest for 84 months and deep discounts.

One can dream.
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