Summary
Ford Motor Company announced a significant field service action related to Takata airbag inflators, impacting approximately 3 million vehicles in North America and other regions. The cost for this action is estimated at $610 million, which will be recorded in the fourth quarter of 2020 results. Importantly, Ford has classified this expense as a special item, meaning it will not affect the company's adjusted Earnings Before Interest and Taxes (EBIT) or adjusted earnings per share, thus providing clarity on ongoing operational performance. Additionally, Ford will recognize a pre-tax remeasurement loss of approximately $1.5 billion related to its pension and other post-retirement employee benefit (OPEB) plans for the fourth quarter of 2020. This loss is primarily due to lower discount rates and is also treated as a special item, excluding it from adjusted EBIT and adjusted earnings per share calculations. While these special items represent substantial financial charges, Ford emphasizes that they do not impact its core operational profitability or cash position for 2020.
Key Highlights
- 1Ford is initiating a field service action to replace Takata airbag inflators in approximately 3 million vehicles across the US, Canada, and other locations.
- 2The estimated cost for the Takata airbag recall is $610 million, to be recognized in Q4 2020 results.
- 3This $610 million expense is classified as a special item and will not impact Ford's adjusted EBIT or adjusted earnings per share.
- 4Ford will record a pre-tax remeasurement loss of approximately $1.5 billion for its pension and OPEB plans in Q4 2020.
- 5This pension and OPEB remeasurement loss is also treated as a special item, excluding it from adjusted EBIT and adjusted EPS.
- 6The pension/OPEB remeasurement loss is driven by lower discount rates and is expected to reduce net income by $1.2 billion after tax.
- 7The underfunded status of Ford's pension and OPEB plans is expected to be around $6.7 billion and $6.6 billion, respectively, at year-end 2020.