Some tough decisions lie ahead.
While the Ford F-150 remains the best-selling vehicle and pickup truck in the US, Ford Motor Company as a whole has just reported some troubling news. In an official announcement, the automaker said its second-quarter loss will be around $5 billion - more than doubling the first-quarter's $2 billion financial loss. However, company executives stressed there's enough cash on hand to sustain things through the rest of the year.
"We believe the company's cash is sufficient to take us through the end of the year, even with no additional vehicle wholesales or financing actions," said Chief Financial Officer Tim Stone. But the question is what happens after that? Will Ford have enough cash on hand to keep the lights on?
In all likelihood, some sort of financial long-term plan will be worked out, but there's no doubt the ongoing coronavirus pandemic is a key factor here. To help preserve cash, the Blue Oval has already cut back on management and executive salaries. Slashing spending on future projects has also been initiated.
The most recent example: the joint Rivian-Lincoln luxury EV SUV has officially been canceled. Meanwhile, Ford continues to work with the United Auto Workers to get its US factories up and running, though no firm date has been set. Ford's market value is now set at $20.6 billion, which is less than the $35 billion cash it has on hand. In other words, Ford will probably burn through a fair amount of that cash during the rest of the year until a recovery plan shows results.
But there's a far greater long-term conversation that might have to take place: can Ford survive on its own without outside help? And by outside help we mean a potential merger. During an Automotive News podcast earlier this week, Morgan Stanley analyst Adam Jonas suggested Ford needs to come to terms with new realities.
"They have to reassess: 'What are we in China? What are we really fighting for in Europe?'" Jonas said. "We don't think they can necessarily do what some of their Detroit brethren have done in Europe in terms of a full exit so quickly. But those things have got to be looked at. 'Are we a global automaker anymore?' I know that might be a tough pill to swallow when you're from Ford… but you've just got to rip the Band-Aid off."
One potential way out of this mess is a consolidation or merger with another automaker, such as Volkswagen. The two companies signed a collaboration deal last year, though it only focused on developing commercial vans and mid-size trucks, as well as EVs and autonomous driving technologies. The arrangement does not involve any shared equity. Volkswagen, at least for now, is in far healthier financial shape than Ford and the two sides could possibly find new ways to help one another.