Global corporations dealt not just with the human toll of the deadly spread of coronavirus in 2020 but also the financial cost, and Ford Motor Co. was no exception, according to its fourth-quarter and full-year 2020 earnings reports released Thursday.
Ford reported 2020 earnings before interest or taxes — EBIT — of $2.8 billion, down from $6.4 billion in 2019, $7 billion in 2018 and $9.6 billion in 2017. The company said it made $3.6 billion pretax in North America.
“Our time is now at Ford,” CEO Jim Farley said during an earnings call with investors late Thursday.
North America and Ford Credit were the company’s only profitable units.
The profit drop means smaller profit-sharing checks for hourly factory workers.
Ford factory workers in the U.S. will receive $3,625 profit-sharing checks, down from $6,600 paid a year ago — reflecting the company’s profits in 2019. Ford hourly workers received $7,600 checks after a strong 2018 and $7,500 based on 2017 earnings.
Not all of the estimated 56,000 hourly workers are eligible for the negotiated benefit; payments are expected in the spring. Ford, General Motors and Stellantis, formerly Fiat Chrysler Automobiles, pay their UAW employees $1,000 in profit sharing for every $1 billion in North American profit before taxes.
The depth and reach of the pandemic costs ranged from total factory shutdowns and installing new safety equipment in worksites to supply chain disruption that stalled production and the slowdown of customer sales during quarantine.
Last year, about 47,000 General Motors workers averaged a profit sharing payment of $8,000, down from $10,750 for 2018 while about 44,000 Fiat Chrysler workers averaged $7,280, up from $6,000 for 2018. Those automakers’ 2020 earnings reports come out later this month.
“We’re turning around the business,” said John Lawler, Ford’s new chief financial officer, after the earnings were released. “You’re seeing us deliver on our promise to lead” on electric vehicles.
He emphasized, “We want to be clear we will not cede ground to anyone.”
In 2020, Ford had additional costs associated with major product launches of the all-electric Mustang Mach-E, 2021 Ford F-150 and 2021 Bronco Sport. The 2021 Bronco will be delivered in the summer.
The automaker’s net income, or profit after taxes and other charges, was a loss of $1.3 billion, down from net income of $47 million in 2019, $3.7 billion in 2018 and $7.7 billion in 2017. Had Ford not had a $1.5 billion pension cost in 2020, the company would have reflected a positive net income rather than a loss.
Ford reported negative net income of $2.8 billion in the fourth quarter, a decrease of $1.1 billion.
Net income includes additional costs from what EBIT reflects.
Ford saw full-year revenue of $127 billion in 2020, down from $156 billion in 2019, generated primarily by sales in North America.
The company has $31 billion cash on hand, up from $22 billion a year ago.
This cash on hand is crucial to investing in the future. Farley said Ford will now invest at least $22 billion in electrification through 2025, nearly twice what the company had previously committed to EVs. Ford plans to invest $7 billion on autonomous vehicles, the company revealed.
Ford Credit saw full-year earnings before taxes of $2.6 billion for 2020. Ford Credit recorded $3 billion for 2019. The credit operation showed $912 million in earnings before taxes during the most recent fourth quarter, up from $630 million in 2019.
Ford said North America continued to generate a large profit.
“We’re seeing real improvements in our core automotive business. We are competing like a challenger now,” Farley said. “We’re moving with urgency.”
In the fourth quarter, Ford posted earnings before taxes of $1.7 billion, up $1.2 billion compared with the same period last year. The company posted a pretax profit of $414 million in Europe in the fourth quarter and a loss of $66 million in China.
Fourth-quarter results in South America reflected a loss of $105 million and a loss of $62 million in the International Markets Group that includes the Middle East, Africa, India, Australia and Russia.
For the year, pretax financial performance by region:
- North America’s pretax profit was $3.6 billion — down from $6.6 billion in 2019, $7.6 billion in 2018 and $8.1 billion in 2017.
- China lost $501 million — after losing $771 million…