DEARBORN, Mich. (AP) — Ford is suspending its dividend to preserve cash as vehicles sales fade due to the coronavirus outbreak.
The company said it’s drawing on two credit lines to put another $15.4 billion in cash on its balance sheet.
Like other companies, Ford Motor Co. also withdrew its financial guidance for the year Thursday.
The cash Ford saves will be used to offset the impact on working capital due to factory shutdowns.
On Wednesday Ford and other automakers announced that they will close all of their North American factories in the coming days. Factories in Europe and elsewhere have already been shut down.
Ford’s shares fell 6% at the opening bell.
Ford’s move is expected to be followed by many companies as they try to hoard cash to survive the uncertain impact of the COVID-19 infections. Automakers are especially vulnerable because under union contracts, they still have to pay much of their workers’ salaries even though vehicles aren’t being produced. Auto companies book revenue when they ship vehicles from the factory to dealers, so if no vehicles are being produced, most of their revenue stream is severed.
“Like we did in the Great Recession, Ford is managing through the corionavirus crisis in a way that safeguards our business, our workforce, our customers and our dealers,” CEO Jim Hackett said in a prepared statement.
The borrowing came from two unused lines of credit. The company said that at the end of last year, it had $22 billion in cash and $35 billion in liquidity.