Welcome to The Grid, R&T’s quick roundup of the auto industry and motorsports news you should know this morning.
Ford Expects $600 Million First Quarter Earnings Loss
The true impact of the coronavirus crisis on automaker earnings will be seen in the second quarter, but it will have an effect on first-quarter results, too. The Detroit Free Press reports that Ford is expecting a $600 million earnings loss for Q1 2020, but that it has enough cash on hand to be safe for the months to come. Ford had $30 billion on hand as of last week, which Chief Financial Officer Tim Stone said is enough to survive with no new vehicle production into the third quarter. Production will possibly resume before then, but this is a sign of things to come. Demand for new cars has become virtually nonexistent as a result of the crisis, and that’s going to hurt all automakers—not just Ford.
In better Ford news, the company will start respirator production today at its Vreeland facility, and is also developing reusable medical gowns made from the material the automaker normally uses for airbags.
Used Car Prices Could Drop Significantly In Coming Months
Right now, people aren’t buying used or new cars. Jalopnik brought our attention to a Bloomberg report that says used car prices could be headed for a complete collapse. The problem is a potential glut of used cars. “Six months from now, there will be huge, if not unprecedented, levels of wholesale supply in the market,” said Dave Pollack, an executive vice president at Cox Automotive, in a letter to auto dealers. “Cars are coming in, but they aren’t selling. Today’s huge supply of wholesale inventory suggests supplies will be even larger in the months ahead.”
Automakers are offering lease extensions to customers to help keep those cars off the market for just a little longer, but it may not be enough. This could be a huge problem for automakers that rely heavily on leasing, as the values for cars soon to be turned in could plummet. Rental car companies will likely hurt from this too.
Toyota-Mazda Joint Venture Delayed
Last year, Toyota and Mazda began building a plant in Alabama to produce yet-revealed crossovers for the two Japanese brands. Production was expected to start some time next year, but Automotive News reports that, unsurprisingly, it’s been delayed because of the coronavirus crisis. Documents seen by Automotive News indicate that production has been delayed by a little over 5 months. The cars should still reach production some time in 2021, though.
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