Auto Giants Swing to Loss During Coronavirus-Driven Downturn — 4th Update

dnrt8765
By Mike Colias and Ruth Bender

Ford Motor Co. posted a $1.9 billion operating loss in the second quarter, the latest global auto maker to report steep losses from factory closures as the pandemic’s financial fallout on the car business comes into focus.

Still, global auto makers this week said they expect profits to return in coming months — barring further factory disruptions related to Covid-19 — as the restart of production has mostly gone smoothly and buyer demand has been stronger than analysts expected when the crisis hit.

Ford’s second-quarter result was far better than the $5 billion operating loss the company signaled in April, when its U.S. factories were idled amid Covid-19 lockdowns. Ford’s loss of 35 cents per share on a pretax basis, adjusted for one-time items, beat the average analyst forecast of a $1.17 loss.

The auto maker lost money in each major region in which it operates, including the normally lucrative North American market, where it lost nearly $1 billion in the April-to-June period. Resilient sales of expensive Ford F-150 pickup trucks helped offset several weeks of lost production in April and May, the company said.

The company posted net income of $1.1 billion for the quarter, after factoring in a $3.5 billion gain related to Volkswagen AG’s June investment in the company’s driverless-car startup Argo AI.

The coronavirus has plunged car makers around the world into one of the deepest crises in recent years and added to struggles the industry was already facing before the pandemic, with softening demand for cars and soaring costs for technology.

Ford’s second-quarter operating result was worse than that of rival General Motors Co., which posted a $536 million pretax loss and breezed past Wall Street’s forecasts.

The gap with GM was partly explained by the geographic footprint of the two companies: GM’s largest market is China, which recovered from Covid-19 shutdowns in the quarter. Ford has a much smaller presence in China and, unlike GM, produces cars in Europe, which was hit by pandemic disruptions during the period.

Ford expects third-quarter operating profit to rebound to between $500 million and $1.5 billion. GM on Wednesday said it expects pretax earnings of more than $2 billion in each of the next two quarters.

Volkswagen slashed its proposed dividend Thursday after swinging to a net loss in the second quarter, but the world’s biggest car maker by sales also said there were signs a recovery was under way in markets from Western Europe to the U.S.

Volkswagen, which also makes the Audi and Porsche brands, posted a net loss of EUR1.61 billion ($1.9 billion) in the second quarter ended June 30, compared with a net profit of EUR3.96 billion in the same period a year earlier. Revenue fell 37% to EUR41.08 billion from EUR65.19 billion as sales slipped across the world because of economic shutdowns aimed at containing the pandemic.

“The first half of 2020 was one of the most challenging in the history of our company due to the Covid-19 pandemic,” said Chief Finance Officer Frank Witter.

Renault SA on Thursday posted a net loss of EUR7.29 billion for the first half of the year as the French auto giant reeled from the effects of the pandemic as well as the woes of its alliance partner Nissan Motor Co.

The plunge was more than twice the loss Renault posted for all of 2009 during the financial crisis. It also outstripped analysts’ forecast of a EUR4.49 billion loss. Shares fell more than 5% in early trading in Paris.

Volkswagen said that because of the heft of the impact from the pandemic and difficulty in predicting the future, the company will propose to shareholders to lower its dividend for 2019 to EUR4.8 per ordinary share from a previous proposal of EUR6.5 per ordinary share, and EUR4.86 per preferred share instead of EUR6.56.

The German auto maker sounded a more optimistic note for the second half of the year.

Through May, sales mainly in post-lockdown China had been showing signs of recovery, while in the U.S. and Europe they continued to decline sharply. But Volkswagen said a recovery in demand for cars in markets from Western Europe to the U.S. helped the group improve car deliveries to customers in June and July, even though they remained in the red.

Daimler AG last week said it was registering signs of recovering demand for luxury cars and electric vehicles, with China leading the way, prompting shares to rise. The pandemic, however, also prompted Daimler to expand cost cutting.

Nick Kostov in Paris contributed to this article

Write to Mike Colias at Mike.Colias@wsj.com and Ruth Bender at Ruth.Bender@wsj.com


(END) Dow Jones Newswires

July 30, 2020 18:23 ET (22:23 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

Next Post

Burberry Shakes Up Shopping With Physical, Digital Shenzhen Store – WWD

LONDON — Burberry is looking to break new retail ground in Shenzhen, China, today with a store that fuses physical and digital elements and asks shoppers to press their WeChat accounts into action as they game their way around the store, making virtual, and real life, discoveries. The 5,800-square-foot store spans […]
Burberry Shakes Up Shopping With Physical, Digital Shenzhen Store – WWD