Q1 2020 Earnings Call
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Good afternoon May have your passport please.
The passcode is for earnings.
Thank you Sir you may have your first the last name please.
First name David last name Brown.
And your company name.
IRA.
Excellent Sir.
And electrification along with connectivity.
Global partnerships that are depression, as well that they've started before the spin Dominican they're gonna sort of service in the future, including Libyan because we've gotten questions about that.
Yeah, the best or better customer experience.
In a moment, Jim Farley will provide more detail on the progress we're making it our underlying business during the crisis.
Really proud of him and he's he's he's just worked around the clock frankly, and so to say it's been a 24 seven effort, it's not an exaggeration.
At the same time, we're pulling every appropriate lever to protect our core business.
Strengthened the balance sheet, Tim So also working around the clock to make sure that the company lead in this initiative.
And bolster our cash to optimize our financial flexibility.
I'll do we have that all in place before the first quarter was over.
Part of skillfully managing through this crises crises is having a well thought out protocol, though for back to work.
We did this for China and I'm pleased that earlier today, we announced will restart or European manufacturing production with enhanced employee protection protocols in place.
It's taking a phased approach starting on may 4th we will restart vehicle in the engine production that most of our sites in Continental Europe.
There will be a gradual ramp up over the next few months before full production is resumed globally.
Well still there's no denying the negative economic consequences of a pandemic.
In the first quarter adjusted free cash flow was negative by 2.2 billion.
Revenue Amazingly was still 34 billion and we incurred of course in EBIT loss around <unk> point 6 billion.
In fact heading towards the middle of the quarter.
Listen to this we were on track to meet or exceed our original guidance for adjusted EBIT in the quarter.
Well as I said earlier be assured that everyone afford us squarely focused on both today and our Q.
We believe it remains bright.
And it's a great sort of great source of motivation for us as we serve that future and of course take care of all these immediate needs.
Right now I'd like to turn it over to Jim Farley Jim.
Thanks, Jim operational excellence, especially in this crisis requires.
Obviously, the dedication, but also collaboration partnership and support from the entire enterprise parts suppliers or dealers employees unions are JV partners.
And our execution.
And this excellence demonstrated this early on and she's in China as Chip said.
I know, we're gonna come out of this a lot stronger.
But we need he agile have a basis a bias towards action and be very transparent with our employees our customers and partners.
Early on in China, we focused on business continuity.
We mapped our suppliers for liquidity and the supply chain.
We create unique logistics portal to track our supply chain, we secured air freight capacity to deliver critical safety equipment to our team in China.
Importantly, including our dealers.
And we use the same air capacity to ensure of supply a critical parts to regions like North America outside of China.
We then partnered closely with our dealers.
We track in store traffic.
Inventory their financial liquidity in health.
And in the states shuddering or dealerships.
We turn.
Together work to.
To drive demand and ensure quality service to our customers.
We provided those customers with a more robust apt to order vehicles online in fact in China today over a third of our sales are now direct online.
We increased doorstep delivery of sanitize vehicles with with what we called zero touch.
We could be expanded to schedule remote service and deal could pick up for maintenance.
And make it easy for customers and our joint venture partners were up and running as it really is February 10.
In fact, as Jim said, one of them J.M.C. re purpose.
Our two time transit van to manufacture over 1500 Ford transit ambulances and the first quarter.
From the start.
We focused on a return to work protocol for our Chinese business.
And then involved governance like we working manufacturing safety requirements and restructuring a lot of jobs inside our facilities to ensure we can protect dispensing.
This protocol is being extended to Europe.
And we'll also be used when we restart or operations around the world, we call it or playbook.
In addition to those accomplishments.
Our China team also quickly honed in on costs.
In the face of significant demand disruption.
For China delivered year over year improvements in both contribution in structural costs.
Actually they got close to their initial EBIT targets for the quarter.
Offsetting all the cobot impacts.
The actions, we took in China became best practice for us.
Part of our playbook and we tackle as we tackled the virus globally protecting our people and eliminating the spread of the virus is Jim described.
I've been industry 30 years I've been afford a 13.
I've seen a lot of wonderful leadership.
Even oh, eight known especially in a way no nine but I have never seen what's happened it forward over the last week's countless acts the leadership throughout every level the organization.
Replicated and added to the success, we realized in China.
Power afford.
Dennard DNA.
And we and we're proud to shared it with that capabilities. Many other people.
The stark reality of a protracted global show it sure showed that set down of our sector and our vertical has forced to Liza laser focus on cost and liquidity.
And just so we didnt in China.
We have ratcheted down spending across the board.
Fixed and variable.
To ensure we come out of the stronger we protected or cycle plan.
Our launches.
And our technology roadmaps, including connectivity.
We believe this pandemic could affect how customers live and work for many years to come with a zero touch now as an integral part of their lives going forward.
Perhaps spring on even more interesting adoption about Tony, especially goods delivery and micro mobility.
Well effects to the virus make cost some shifts in timing, we're really excited about rough forthcoming.
The redesign F 150, it's the anchor of our F.C. rebrand, it's America's best selling vehicle 43 years.
And the launch will feature in the first ever hybrid electric.
On 50.
We're also revealing a new bronco brands.
We're going to continue our launch a 30 market specific Ford and Lincoln vehicles in China over the next three years 10 of which will be electric.
We're going to offer electrified versions of the linking corsair and afford escaping kuga.
Which is now in launch in China and in Europe.
We're going to continue preparations for the much in dissipated return of the legendary Ford Bronco next year.
And shortly after I began my new role and in in February.
I did a two day deep dive with the automotive leadership team.
Where we really were.
And how we were going to address the task in opportunities ahead.
And from the start I was known impressive the diversity of skills and knowledge of our team.
The look in the Ryan the desire and accountability to take on those opportunities and moved the company forward.
Together, we came up and then a simple frame.
We have a few things to fix and accelerate and we need to growth plan for the company.
The recent challenges presented by the virus and just amplified our commitment to these three areas.
There is no grace period for transforming Ford.
Two weeks ago, we announced the reorganization that will allow us to better execute against those things that we need to fixed and accelerate and to establish our growth initiatives.
We empower to talent in diverse group of leaders.
From inside but also from outside afford the dry transformation into high growth high margin business is among the changes Kumar go hold true who's been President North America.
We'll take on expanded role for South America, and I am GE markets as well.
We sit Drake.
Seasoned executive in our industrial system was named Chief operating Officer for North America, and remains Vice President of global purchasing she will be laser focused on or launches our cost in our industrial system in North America.
Gil Cool all every who is distinguished career in the Israeli military intelligence core has joined forward as chief Global data insights and analytics and Ted Cannis, whose team developed the revolutionary Mustang Mckee.
And the F 150 battery electric.
It was appointed general manager commercial vehicles.
Now these leadership changes were specifically aimed at sharpening our focus on product and launch execution.
Fully leveraging smart connected vehicles and big data to serve our customers and the company.
To improve our quality and lower costs.
And creating a dedicated commercial vehicle business in the U.S. in Canada I'm confident this new structure will facilitate a much faster enterprise decision, making and further efficiencies.
I want to assure you at the same commit minute excellence, we displayed to overcome cobot 19, or what we are leveraging as we bring Ford's manufacturing and salary population back online and turn our attention towards launching those incredible new forwards and our winning portfolio.
Over to Tim.
Thanks, Jim.
It's just over a year since I came to Ford.
The primary reason I join it's my belief the company has abundant opportunities to improve customer experience.
Enhance effectiveness.
Grow increase superior value for stakeholders.
Being a part of this team that's his tackled the crisis has further strengthened my confidence in our team.
And for future.
That's right.
Our comments on this call even amid what we're doing to protect people from the virus.
And help stop it spread.
Our actions have been consistent with the priorities we've discussed with you for several quarters.
First.
Proving customer experience and operational execution.
Second.
Progressing our global redesign, making tough choices to lay the foundation for improvement in future automotive growth.
Free cash flow profitability and returns on capital.
Third enhancing fitness.
Clearly structural cost and capital efficiency and alliances that can drive durable scale benefits.
Fourth.
Prioritizing meaningful opportunities for profitable long term growth in mobility.
And fifth.
Implying continued disciplined to drive strong results from Ford credit.
The first quarter lower industry volumes across all regions contributed to a 21% decline in wholesales.
And a 15% decrease in revenue.
These results largely drove an adjusted EBIT loss, a point 6 billion and a negative 2.2 billion in adjusted free cash flow.
Our results for constrained by the adverse impact of the virus.
We estimate the unfavorable impact to adjusted EBIT was at least $2 billion.
Your automotive business lower volume accounted for a 177 million dollar loss in EBIT.
As 346 million positive EBIT from North America was more than offset by losses in other markets.
To be helpful.
And informed by your input.
Slide 10 of our debt includes additional color on the drivers of the year over year change of EBIT.
Including warranty, which was higher by <unk> point 5 billion.
A structural costs, which were lower by 8.3 billion.
Looking at the business in more detail provide some color on why.
Up until the middle the quarter, we were on track to meet or exceed our initial EBIT guidance for the first quarter.
Supported by improved product mix and the benefits of our global redesign.
In North America.
Well top and Bottomline metrics were negatively affected by the decline in units.
Revenue in EBIT did benefit from better mix, especially F series and explore.
This improvement reflects a more disciplined approach to capital allocation.
Which is focused on investments around the globe on our franchise strengths.
This includes the upcoming launches.
Our all new F 150.
And three products that are new to the market a small rugged offered utility.
I must say Mckee and Bronco.
We will be able to update you a launch timing what should have a better understanding of our operational readiness as we bring our manufacturing back up.
EBIT was also negatively affected year over year increased warranty costs as we roll forward higher rates from the second half of last year.
We also absorbed higher material costs for new models during the quarter.
In South America, Wholesales and revenue declined 13%.
And 21% respectively.
In addition to the lower volume revenue was also influenced a weaker currencies.
Which were only partially offset by higher net pricing.
Importantly, we narrowed our EBIT loss in the region to point 1 billion a 29% your your improvement.
And our strongest performance since 2013.
Even results do favorably reflect benefits from our global redesign.
Putting exiting heavy truck production.
Discontinuing certain passenger vehicles, and reducing headcount as we migrate to lower cost.
So like footprint.
In Europe, Wholesales, and revenue were down 25, and 16% respectively.
In addition to the virus wholesales were also weighed down by the timing of our all new Kuga, which followed a normal wants curve.
We're also absorbing the effects of our decision to discontinue low margin products.
As we focus our portfolio and industry, leading commercial vehicles.
And more selective range of passenger vehicles and selected imports.
All new vehicles. This year include Kuga, Puma and explore as movies, which should get which together will drive an increase in our mix of SCB year over year.
The decline in volume also reduced EBIT, which was down 4.2 billion year over year.
As expected the region absorbed higher material costs to support compliance with new CEO to regulations.
The favorable shift in our European pro product portfolio, which we expect to continue wants to restart production.
Reported higher net pricing.
And the benefits of global redesign actions continue to drive down structural costs.
We're on track to complete the balance of our headcount reductions, but 10000 by year end.
China was at the forefront of the crisis, our team did a great job mitigating the negative effects of the virus and our customers other stakeholders and our bid and on a business results.
Well wholesale than revenue were down about 30%.
New product launches, including escape of course there.
And faster improvement in sales relative to the market contributed to a 10 basis point improvement in share to 2.2%.
Explored aviator are on track to launch this year it should be important additions to our China portfolio.
Our China EBIT loss, a point 2 billion was down point 1 billion year over year.
As lower volume and adverse exchange, partially offset by prudent and structural cost.
Losses on mobility continue to reflect strategic investments in future growth opportunities in mobility services, and and vehicle business, while development for autonomous vehicle platform.
For credit delivered E B T.
30 million in the quarter.
Down 771 million year over year.
Portfolio performance is strong in the first quarter and delinquencies and charge offs remain at low levels.
However, the results include cope with 19 related accruals of about $700 million.
The most significant of which is for future credit losses, as well as lower auction values for off lease units awaiting sale at auction.
Let me share remained below industry average.
And off lease auction values performed better than expected up 1% year over year end up 2% sequentially.
At present, most vehicle auctions in the U.S. are closed sales volume was very low and prices are disruptive.
As vehicle auctions reopen miksic market prices to be disrupted for some period.
And it's difficult to say, how bad the or for how many months.
However, I do expect used vehicle markets to normalize overtime.
Managed receivables of 147 billion at quarter end were 9 billion lower year over year in 5 billion loan at year end.
At the end of the first quarter for credit had $28 billion and liquidity.
Which remains above target.
And for credit has access to diverse funding sources to continue providing financing in the future.
For credit balance sheet strong.
Ample liquidity.
And importantly, it funding structure is self liquidating.
This means that Ford credit generates liquidity.
Which reduces its funding requirements as balance sheet shrinks lower automotive sales.
For credit is an important source of support for customers and dealers during this crisis.
And for credit remains an important strategic asset.
Now, let me turn to automotive liquidity and provide a little more color or some of the strategic actions. We've taken since March to provide additional flexibility during this challenging time.
In March we suspended a regular dividend, which equates to 2.4 billion per year.
We also suspended or anti dilutive share repurchase program, which was <unk> point 2 billion last year.
At the same time, we drew down over 15 billion under our corporate and supplemental credit facilities to bring cash on the balance sheet and provide greater certainty.
Finally last week, we completed an 8 billion opportunistic unsecured issuance.
To further improve our cash liquidity profile, while most of our global operations remain shut down.
As of April 24, our cash balance was strong at $35 billion.
And now we believe is sufficient to take us through year end with no additional wholesales.
Our plan, though as we announced today about Europe to begin a phase restarting the second quarter.
As we plan to wholesale much sooner than the ended the year.
We're also working capital.
Just like most other Oems there are two phases of cash outflow after a halt in production.
For Us this began in late March.
The first phase is more severe is driven by about a 45 day run off in supplier payables.
We have about 13 billion of production supplier payables. After late March production suspension, which will run off by early may.
While this number can move around during the year, depending on scheduled plant shutdowns and other factors. It's a good approximation of that production payable number.
The second phase is post run off.
After production for payables have been extinguished.
Once this happens our cash outflow dropped substantially.
Our ongoing payments, which are fairly consistent includes structural cost and warranty.
And vehicle incentive payments.
Once production starts there was an inherent cash flow leverage.
Once even modest wholesales resume our cash flow dynamics will improve.
Driven by the restoration of supplier payables, if the large part immediate payment of vehicles.
Upon wholesale.
We're also thirdly, assessing and aggressively addressing our operations and looking for opportunities to preserve cash lower operating costs improved fitness and driver business to amplify our long term potential.
These include reductions of capital spending.
Deferring or eliminating non essential expenditures across our business.
And deferring executive compensation.
The incremental cash from these and other actions provide additional flexibility as we navigate this challenging environment.
For example, this year, we expect capex to be 6.3 to 6.8 billion.
Down by about half a billion compared with our February guidance.
And 0.8 to 1.3 billion lower than last year.
Turning to our outlook in mid March when we withdrew our financial guidance for 2020.
As a reminder, when we gave your outlook in early February.
We said excluding impacts of Coburn 19.
Today, Unfortunately, the economic environment remains too uncertain.
To provide updated guidance for the year.
However, assuming in the second quarter, we restart production in a phased way we believe we will see the largest impact from this crisis in the second quarter.
As industry volumes continued to be down significantly in every region year over year.
As a result, we believe it just doesnt second quarter EBIT.
Will be a loss of more than $5 billion.
The recovery actions, we've taken and are working on.
And the billions.
But we know we will not be able to recover everything or make up all of the lost volume.
Lower industry volume will be our biggest headwind this year in any mix and net pricing benefit we may realize from a global focus on franchise strengths, including exiting lower margin products.
Full year impact to explore launch in 2019, and new launches such as F. 150 slated for later this year will be overshadowed by the negative impact of lower industry volume.
Relative to structural cost, we expect favorability year over year, driven by actions to mitigate the impact of Kobin 19, and our ongoing fitness actions.
Before we turn it over to Q and a let me close with.
We remain committed to a strong balance sheet.
During what is right to preserve a future.
Which is why we've been proactive in charted a course and maximizing liquidity during this uniquely uncertain time.
Our recent actions provide flexibility to weather the president disruption caused by covered 19 and the confidence to continued to invest in growth opportunities.
We have a strong bias for action.
To improve our customer experience.
Operational execution and drive our financial performance, including free cash flow generation overtime.
I'm optimistic.
We better positioned than ever and the other side of this to achieve our long term potential.
Operator.
Thank you as a reminder, if he would like to ask a question. Please press Star then one on your telephone keypad Kinda talk question press the pound key again, please limit yourself to one question only.
Our first question, it's going to come from the line have John Murphy Bank in America.
Hi, Good evening, everybody, it's a really great to hear from from all of you can you talk to stick to one question, but I will typically activate it very tough times like this you get it very good recovery because a lot of the lessons learned in tough time result in sort of real real Fisher.
C and focus I'm just curious you mean, Jim you were kind of talking this and Tim you're talking about this on the balance sheet side. Just curious if you can really kind of illustrate or or kind of explain any of those opportunities you're seeing here in the near term, specifically and because you're kind of going through this roaming restart with China and in Europe.
North America, I mean, you're seeing some of these opportunities are.
Our ready I, just you know if you give us more details around so we can understand that because you know traditionally one to three years out your margins are significantly higher in some cases, you know in the past recession, they're an all time highs three years. After that we had just getting to know nine so just trying to understand what you're seeing right now what the opportunities are in China Europe.
And and ultimately in North America.
Thank you John Jim Hackett I'm going to for all the question is all quarter back the calls so that we have big lagged here.
And John just an observation that I agree with you. This is my third a crisis in business. This one's a unique one the other two were substantial and.
And I observe that there's there's cost that comes you know has added to income statement. It comes from disruption for example, we were shipping product.
Expediting product from China to get to the factories here parts I should say so that we didn't have any disruption and.
As the virus spread like a water slick the stuff that we are air Freighting was eventually going to get stopped in production. So we have the cost of that and it's what Tim has talked about.
That we've been working to offset those kinds of increased costs.
And there's a lot of examples of that it's in the billions that we live work too.
Also confirming with you that in this time of focus you start to think of things.
That matter to the company I don't want you to think of them. When you should have stopped in many ways. These are things that you know there's no races going on so some some of the in investments that you would have because the virus has diminished participation and things we don't have that cost. So we have the savings there.
And then you know.
Having that focus the gym Farley talked about we find that we can actually improve our leverage so I want to confirm with you.
That yeah, we're thinking about this the same way now you asked for some specifics and I'd like to turn it over to Jim because I think China is.
A good example of where there was advantage as we came out this Jim.
Thanks, Jim Hi, John So in China, you know, we learned a lot I'm not only just start up the operations safely. We started in mid February we're now up to 90% of our salary workforce in all of our plants are up and running actually JMC never shut down their best quarter ever.
But they get after costs really quickly I realize offset all the cobot impacts in the first quarter.
And we learned a lot we learned that the mix coming out is very different than the mix going in and so our mix of product is quite different it's very favorable.
We went online for our sales this had about a third third of our sales are now online in North America, It's north of 25%, that's an efficiency an improvement in our fitness.
We did lower cost we expect that to.
Some of that to flow obviously.
In North America, very focused on the recovery items on material cost and warranty costs those are the kind of caustic.
Flow into subsequent years in fact were more than committed to ever in that 10% EBIT margin in North America, and we're as Tim said, we're forecasting a lower Saar. So that must mean, obviously our costs are going down we do have some great launches coming up which will be a tailwind in North America.
The things we learned in China that we're exporting is to ship patterns as you come back a very important so are getting the launch teams in the facilities to work the launches couture, we're just in the year in.
In China, launching Kuga and localizing some of our largest Cvs those are very important for profitability very same kind of exercise, we're doing in north American third and fourth quarter and the last one is supplier readiness.
You know what we learn in China was got to make sure your supply basis ready. So we surveyed almost 1500 suppliers in western Europe, and the U.S. to make sure. They are ready to come up and have the same play book in terms of prioritization of safety.
So yeah I mean, the bottom line is a it's very difficult times, but before team is at its best and we're going after crop cost that will flow. Thanks back to your Jim.
Operator, we'll take the next question. Thank you. Our next question that's going to come from the line I've Rod Lache much Wolfe research.
Thanks, everybody good to hear from you just wanted to follow up on on that question. So you look at this point, if we back out working capital looks like the business and the auto business is running at around a 1.3 billion dollar bond in the quarter.
And Ah if you bring your capex down to the low sixs, maybe that could even converge on on breakeven.
It's something that looks like it corresponds with the 15 million SAR.
But you talked about coming out at a stronger. So I was hoping maybe you could just tell us a little bit about some of the approaches that you're taking here are there any opportunities to accelerate restructuring maybe in light of that that's a crisis and what do you think you might actually look like only.
Actually do recovered with 50 million SAR.
Thank you Rod, it's Jim Hackett, let me start with saying to you that you know 26 years in the job like this I never had a business plan that was called pandemic. So.
And I mean that in all.
You know sincerity, because we just never imagined the economy, turning off and the other two crisis that I was in we had we had deep troughs of issues, but this this was unique secondly.
Ford is been really diligent and working on a number of fronts that I'm proud to tell you as I look back and other companies, which I would admire in our industry. There's some of you reference and I take the beginning point of wood I guess, they started and where they are now.
I would say that are the effort to get all the new products.
In the portfolio are going to be extraordinarily beneficial to the company you just got to remember we're going from one of the oldest product lines to the newest and in the course of this dependent Emmett comes in and kind of interrupt and it's it's going to slide the timing of that but we've got to new F. 150, We've got a new.
Small rugged off road asked you V.
We've got an all new Bronco, we got the Mustang Mckee. So all the work on that before the pandemic is value that we're going to enjoy this is why we've we believed we thought last year was going to be the tunnel year and we had the problems in Chicago, we totally fix that explore was.
Doing really well and now where we were waiting for this new product. The second thing is we started on restructuring, particularly in Europe, just want to comment again, I'm not being cynical, but that was 40 years of problems that we took on in a very short time, we actually sped up.
The commitment for restructuring, Bob as Bob Shanks, and I had one plan.
We turn we turned up the.
Vitality of it. We spent ahead, we actually borrowed money to match the kind of returns we were going to given that all worked out we're not done there I'll, let Jim in a minute explain what's going on.
We initiated a redesign and I don't know whether that sunk in but we took 20 over 25% of the management out of the company.
You know in advance of what we didn't expect which is a pandemic. Although we thought a recession was in the off in many of you said. This is the longest expansion, where we were getting ready for that so that's serving us well and in fact the way the teams working now with the recent management change I made.
It is moving much faster with much more clarity so.
Im just want to confirm that the only thing that I would witness with you is I didnt expect China to be a problem in the last two and a half years the way it turned out to be but I now feel that there was more problems there than just what Ford enjoyed and now the work we did earlier to start getting things.
It's turned around.
We actually are feeling confident that China is actually the picture there is going to improve particularly with the emphasis that we put on to get the product right in that market. It wasn't right.
Which is you know the gestation period for getting all that flipped around is not the kind of thing that happens you know in the course of.
90 days or six months, but thats not asking you to wait longer it's just saying that if you're impatient about all the stuff we've done and why are we seeing the value I'm trying to portray to you. They are synchronous and they will yield that better but I didn't expect depend damning. So Jim Farley, Let me just.
Tie this back to you and let you add.
Virtue in terms of the way you see the restructuring in in Europe.
Got it. Thanks, Thanks, Jim Hi, Rob a very quickly or just want to emphasize that the you in South America restructuring or no regrets move.
We reduced the head count in Europe by 12000, you at 12000 people teammates by the end of this year, we close facilities Bridgend is still to come we've cut costs.
Especially structural cost in South America, we have 40% less staff, we've gotten out of yes, then focus we got out of the heavy truck business and consolidated sent Bernardo. So those are no regrets move.
But you know that the hangover Cove, it is obvious and everything's on the table or our team under owns the plan, it's there's still locked down and execute.
North America, we see a lot of opportunity.
And we want to make sure we have the capital to invest in North America.
We do see a way to 10% EBIT.
In a lower industry, even with the flow through the of the cost actions, we're taking plus as Jim said this great new products.
And really for for my team they want to make sure that we have room for growth, especially in North America and does so that's why we're going to look at all the operations critically thanks over to you Jim.
Yeah, Rod and just to confirm the there's not there's that one truth right don't waste a crisis, so I want to confirm to you that.
The attitude in the spirit is if we can speed things up or we can.
We get we can now have a.
What I would say more productive discussions was social plans or governments you know core all that's on the table in the kinds of things that we would be working on but nothing to announce today.
Okay. Thank you.
Our next question, it's going to come from the line of a monumental rosner Deutsche Bank.
Good evening everybody.
Emanuel and confirming mek inhibitor. Thanks [laughter].
Okay, Great I will I was actually hoping to ask a yet another follow up on the the restructuring plan. So I hear you loud and clear no grace period to fix for don't waste a crisis that certainly not just.
China is obviously very much needed, especially if the industry doesn't recover to previous levels anytime soon and the same time I'm a little bit struggling with.
I guess, the budget and set for restructuring and that you. After this year, which is no remains pretty minimal willemse tweak down a little bit even versus the last update and I view. It is somewhat is inconsistent so what is.
Why can't you do more why can't you spend more you've raised recently another.
$8 billion.
It feels like now would be the time to Oh, Gee, you email cost or actual into accelerates that process and it. It seems like he doesn't seem to be budgeted you know how do I reconcile though.
Yeah, well I guess, the it's the confirmation I want to make is yes. Your instincts are.
That there can be more that can be done we're talking about.
And just you know to draw the parallel to you in 14 days, we got a ventilator designed and built you know for the country. So I know for and move really fast and that pandemic.
We send everybody home on you know.
March 13th.
So I don't know if you're asking you know in that time, you would've expected a plan.
That would you know change the strategy the company I'm the way I think about the crisis is you've got a priority first.
Of.
Stabilizing that you can operate and recover some of the costs that are just you know flying out the door and that's where we did a really great job in parallel we have begun planning and discussions.
With the spirit of don't waste the crisis and I just confirmed there's nothing to announce to you today, but would not be fair for you to walk away in say Ford's not doing anything I don't think that would be right and I'd like to clear up.
What you just asked about budgets I'm going to turn to Tim to make sure. We're you're reading correctly. The way. The cash flows are working given that we had to roll off of the payables and what we have committed to restructuring Tim.
Great. Thanks, Jim Thanks minimal.
So as it relates to the to the restructuring.
Yeah, the churches in the cash for 2020.
That we commented on a point 7 billion at 1.2 billion or associated with the redesign axis had been announced.
And their appeal to that to be 4.4 to 4.9 billion and charges.
On the way to up to 11 billion as we've talked about in the cash would be 1.8 to 2.3 billion cumulative on the way of up to 7 billion overtime. So.
To fit that we are thoroughly assessing and aggressively addressing our operations look into the identify as always opportunity too.
Through her fitness and redesign the business.
For a long term potential.
Well, we give the.
Longer term view of the 11 billion.
Up to 11 billion EBIT in up to 7 billion cash but to specific amounts we're guiding to alluded to.
Actions, we've announced thus far.
Understood. Thank you.
[noise], calling back to you.
Thank you our last question for the day will come from the line up guess back with RBC capital markets.
Thank you maybe just one quick one on on Ford credit.
I understand you simply took the write down of vehicles are waiting auction.
I believe the way. It works is you you've got also take the supplemental depreciation for the remaining term for the rest of the Buck. So how should we think about that over over the course the year and then are you still expecting Ford credit to dividend anything back to the motor confused here.
Thank you I'm going to him that to Marion Harris, Who's the President and Ford credit married.
Thanks, Jim Hi, Joe room.
So good observation. So let me talk about what was in the quarter in what was not in the quarter and then talk about the forward quarter. So in the quarter was credit loss reserve changes for the retail loan book and for our commercial lending as well as credit loss estimates on the lease book, which actually flows through lease accounting.
As well as they reduce valuation on those vehicles that were just off lease and waiting sale at auction you correctly pointed out that in the period was not included any changes and outlook on future auction values of the portfolio those changes in auction values will flow through the fuel.
For periods. According lease accounting and we described this in great detail and some of our educational disclosures that we have on the topic.
We're not going to disclose today.
Well give any guidance on what we think that will be in the future. It's still too uncertain as Tim said, we don't know the depth of for how long the auction market will be disruptive, but we are very confident that the that's used vehicle market will return to normal.
And then on dividends.
The only thing I would say is that they are functions net income and balance sheet size and leverage.
And there will be what it'll be we're still continuing to target an eight nine leverage.
Thank you Jim Thank you Mary.
I would now like to turn the conference back over to Jim Hackett for closing comments.
Yes. Thank you then thank you callers.
I mentioned this represents the third metal level crisis I've been involved with as a CEO and yes. This not this one not only tragically has had a larger human toll. It also represents a first were for all intents and purposes economy was turned off and the face of all these events I've been able to pay witness to those who rise to be better and likely surprise.
As you with their resourcefulness selflessness, and ultimately resilience companies to define themselves in the times of crisis.
We hope that we've been able to talk to you why we think you're seeing forward as it at its best as we protected our people and we did all we can to serve our fellow man and we believe we safe guard the bright future at Ford Motor Company.
We look forward to sharing more of our response and the idea that you've asked about an impact as it will be lingering effects of the virus until it's totally contain.
With that we're all Gerard and thank you for joining us Tonight.
This concludes the Ford Motor Company first quarter earnings Conference call. Thank you for your participation and you may now disconnect.
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Uh huh.
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