01—Abstract
Summary
Summary of the 10-K filed February 5, 2021. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2020 Form 10-K shows a year sharply impacted by COVID-19.
Total revenue fell 18% to $127.1 billiona, and the company posted a net loss attributable to Ford of $1.3 billion (diluted EPS of -$0.32). Company adjusted EBIT dropped to $2.8 billion from $6.4 billion, with the adjusted EBIT margin falling to 2.2%. Automotive wholesales declined 22% to 4.19 million units, and Automotive EBIT fell to $1.6 billion.
Ford Credit remained a relatively steady contributor, with EBT of $2.6 billionb, though credit loss reserves rose sharply on pandemic-related economic risk. Balance sheet and liquidity were a clear strength. Ford ended 2020 with $30.8 billion of Company cash and $46.9 billion of total Company liquidity, both substantially higher than a year earlier, largely due to an $8 billion unsecured bond issuance and full draws and repayments on its revolving facilities.
Automotive debt roughly doubled to $23.5 billionc, and the company suspended its quarterly dividend after the first quarter, paying $0.15 per share for the year versus $0.60 in 2019. Ford's credit ratings are all sub-investment grade at BB+ or Ba2 with negative outlooks from all four rating agencies, a key risk for investors. Looking forward, 2021 guidance calls for adjusted EBIT of $8.0 to $9.0 billion and adjusted free cash flow of $3.5 to $4.5 billion, excluding the impact of a global semiconductor shortage that management says could cut first-quarter production by 10% to 20%.
The company also disclosed a plan to exit manufacturing in Brazil with about $4.1 billiond of pre-tax special charges, and continued progress on its global redesign. Significant risks flagged include the semiconductor shortage, uncertain emissions and fuel-economy regulation, pension underfunding, and Brazilian tax disputes that could require over $1 billion in collateral.
02—Key points
Key Highlights
- Revenue declined 18% to $127.1 billion; net loss attributable to Ford of $1.3 billion, or -$0.32 per diluted share, versus $0.01 in 2019.
- Company adjusted EBIT fell to $2.8 billion (2.2% margin) from $6.4 billion (4.1% margin); adjusted EPS was $0.41 versus $1.19.
- Automotive wholesales fell 22% to 4.19 million units; Automotive EBIT declined to $1.6 billion, with North America contributing $3.6 billion.
- Company cash reached $30.8 billion and liquidity reached $46.9 billion, aided by an $8 billion unsecured debt issuance in April 2020.
- Ford's senior unsecured ratings sit at BB+/Ba2 with negative outlooks across DBRS, Fitch, Moody's, and S&P, leaving it below investment grade.
- 2021 guidance: adjusted EBIT of $8.0-$9.0 billion and adjusted free cash flow of $3.5-$4.5 billion, excluding semiconductor shortage impacts.
- Dividend was suspended after Q1 2020 (full-year dividends of $0.15 per share versus $0.60 in 2019), and no share repurchases were made in 2020.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Ford Motor Co lost $0.01.
- Revenue$127.14B100.0%
- Cost of revenue−$112.75B88.7%
- Gross profit$14.39B11.3%
- Operating costs−$18.80B14.8%
- Operating income−$4.41B3.5%
- Interest, other & tax$3.13B2.5%
- Net income−$1.28B1.0%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 5, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $127.14B$155.90B | −18.4% |
| Cost of Revenue | $112.75B$134.69B | −16.3% |
| Gross Profit | $14.39B$21.21B | −32.1% |
| R&D Expenses | $7.10B$7.40B | −4.1% |
| SG&A Expenses | $10.19B$11.16B | −8.7% |
| Operating Expenses | $131.55B$155.33B | −15.3% |
| Operating Income | -$4.41B$574.00M | −867.9% |
| Interest Expense | $5.05B$5.41B | −6.6% |
| Net Income | -$1.28B$47.00M | −2814.9% |
| EPS (Basic) | $-0.32$0.01 | −3300.0% |
| EPS (Diluted) | $-0.32$0.01 | −3300.0% |
| Shares Outstanding (Basic) | 3.97B3.97B | 0.0% |
| Shares Outstanding (Diluted) | 3.97B4.00B | −0.8% |
05—Questions
Frequently Asked Questions
Why did Ford post a net loss in 2020 after a near-breakeven 2019?
The loss was driven mainly by COVID-19 shutdowns that cut wholesale volumes by 22% and revenue by 18%, along with $2.2 billion of net pre-tax special items. Those items included Global Redesign charges in South America and Europe, pension and OPEB remeasurement losses, and a $610 million Takata inflator field service action, partially offset by a $3.5 billion gain on the Argo AI and Volkswagen transaction. Ford also recorded $1.3 billion of valuation allowances against U.S. tax credits, which pushed the effective tax rate to -14.3%.
How strong is Ford's liquidity position heading into 2021?
Liquidity is solid. Company cash rose $8.5 billion to $30.8 billion, and total Company liquidity reached $46.9 billion, including $18.6 billion of committed credit lines. Ford Credit ended the year with $35.4 billion of net liquidity available for use. Management targets a minimum Company cash balance of $20 billion. The corporate credit facility carries a $4 billion liquidity covenant, and the company has no material near-term maturities beyond the DOE ATVM loan and some short-term debt.
What are the main risks to Ford's 2021 outlook?
The most immediate risk is the global semiconductor shortage, which management says could reduce first-quarter production by 10% to 20% and reduce full-year adjusted EBIT by $1.0 to $2.5 billion if extended through the first half. Other key risks include the uncertain outcome of U.S. fuel-economy and GHG regulation litigation, possible incremental Takata airbag recall costs, pension underfunding of $6.7 billion, and potential Brazilian tax assessments where collateral could exceed $1 billion. Ford's sub-investment-grade ratings with negative outlooks also raise funding cost and access risks.
Why is Ford closing its Brazil manufacturing operations?
In December 2020, Ford committed to exit manufacturing in Brazil and move South America to an asset-light business model. Production at the Camaçari and Taubaté plants ceased in January 2021, and the Troller plant will close in the fourth quarter of 2021. The company expects pre-tax special item charges of about $4.1 billion, including $2.4 billion recorded in 2020, with about $2.5 billion paid in cash, mainly in 2021. South America had struggled with negative EBIT margins for several years, which the restructuring is designed to address.
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