Categories Analysis, Consumer

Ford (F) got hit by COVID-19 and here’s why a recovery will not be easy

Ford said its inventory levels were healthy in spite of the production downtime and low industry sales

Ford Motor Company (NYSE: F) reported a 12.5% decline in total US vehicle sales for the first quarter of 2020. The sales numbers were heavily impacted by the coronavirus outbreak leading to declines in sales of trucks, cars and SUVs.

Car sales saw the worst drop at 36% while SUVs fell 11%. Trucks were down 5.4%. Sales of the F-series model declined 13.1% due to the timing of fleet sales and the pandemic hurting March retail sales. Ford brand SUV sales fell 12.7% while Lincoln SUV sales rose 6.1%. Ford’s overall van sales were up 5.7%.

It could be a tough year for Ford Motor Company
(Image for representation only/Courtesy: Rafael Kellermann Streit/Unsplash)

Despite the overall drop in SUV sales, the company saw retail sales gains for its Ford Explorer and ST Explorer brands. Ford also said its inventory levels were healthy in spite of the production downtime and low industry sales.

However, Ford’s difficulties might not end so soon. The pandemic has caused the company to shut down production in North America, South America, Europe, India, South Africa, Thailand and Vietnam. The company had earlier planned to restart operations in its North American factories in April but has further delayed them as the health crisis continues unabated. These production stoppages are likely to impact results in the coming months.

Over the past two months, Ford has issued multiple safety recalls for its Ford Fiesta, Ford Fusion, Ford Ranger and Ford F-150 vehicles. It remains to be seen how much these recalls are going to cost the company going forward.

Earlier this month, Ford announced it was undertaking measures to maintain its financial flexibility. The company suspended its dividend, withdrew its guidance and said it would use up its entire credit facility. Ford also announced six months of payment relief for some of its new car buyers.

Also Read:  Costco Wholesale Corp. (COST) Q4 2020 Earnings Call Transcript

The aforementioned factors are likely to drive up costs and hurt sales in the coming months. Even after the pandemic subsides and the economy slowly recovers, amid the financial crisis caused by unemployment and low pay, there are less chances of seeing a huge demand for new cars. This could also affect Ford’s sales numbers. All in all, it is likely that Ford might have a tough time this year.

Ford’s shares were down 1.9% in afternoon hours on Thursday. The stock has dropped 53% since the beginning of this year.

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