The two largest U.S. automakers on Thursday announced measures to shore up their finances as the coronavirus pandemic takes a deep economic bite, with Ford Motor Co (F.N) aiming to resume production next month of its most profitable vehicles while cutting costs further.
General Motors Co (GM.N), the No. 1 U.S. automaker, said it planned to keep its plants closed indefinitely and was reducing the pay of salaried employees and executives and suspending some future product programs to conserve cash.
GM’s chief executive and chief financial officer issued a stark warning to company employees in an internal video, saying that “significant austerity measures” were needed to preserve the company’s long-term viability.
To generate cash, Ford said it was poised to restart production at some plants in North America as early as April 6, bringing back such profitable vehicles as its top-selling F-150 full-sized pickup, the Transit commercial van and SUVs. The plants that produce those vehicles are located in the U.S. states of Michigan and Kentucky and in Mexico.
To save cash, Ford said it was temporarily cutting top executives’ salaries, among other actions. This came a day after Standard & Poor’s downgraded the Dearborn, Michigan-based company’s debt to “junk” status and warned more downgrades could be necessary.
“The actions we’re taking now are wide-ranging and substantial,” Ford’s chief executive, Jim Hackett, told employees in an email early on Thursday. “We hope they will be enough to give Ford the financial flexibility to ride out the economic and business effects of the coronavirus.”
The pandemic, which has killed more than 21,000 people globally, has forced the shutdown of auto plants around the world as entire cities have gone into lockdown to stem the spread of the virus.
Ford previously drew down credit lines to build its cash position and suspended its dividend. GM also drew down its credit line, but did not suspend the dividend.
The U.S. Senate on Wednesday passed a $2 trillion economic rescue package to help unemployed workers and companies, including the auto industry, hit hard by the outbreak. The measure has been sent to the House of Representatives for a vote on Friday.
President Donald Trump, concerned about the economic repercussions of an extended shutdown, has said he wants America to get back to business by Easter, which is April 12.
To get more cash coming in, Ford said it would restart key plants, while introducing additional safety measures to protect returning workers from the coronavirus. It said it would provide details on the new measures later.
To conserve cash, Ford said its top 300 executives would defer 20% to 50% of salaries for at least five months starting May 1, with the executive chairman deferring his entire salary. Hackett will defer half his salary.
However, Ford employees will continue to get healthcare coverage and those exposed to the virus and placed in quarantine will get paid time off, he added.
General Motors Co (GM.N) and Fiat Chrysler Automobiles NV (FCA) (FCHA.MI)(FCAU.N) previously said they would shut their North American operations through March 30 and reassess after that.
FCA on Thursday extended its shutdown through April 13, while its parts distribution centers will continue to operate with paid volunteers. Mexico’s status is subject to a separate announcement. (Source: Reuters)