DETROIT — The cumulative compensation for the six top executives at Ford Motor Co. — $70 million — exceeded the automaker’s annual net income of $47 million in 2019, a year that included a botched Ford Explorer launch and billions in warranty costs.
On Feb. 4, when reporting that annual profits plunged from $3.7 billion one year earlier, Chief Financial Officer Tim Stone characterized the situation as “not OK.”
Now, Ford faces a whole new set of financial and production issues since shuttering in late March because of COVID-19 safety concerns: In addition to getting plants running again, Ford must try and determine when to launch its high-profile Ford Bronco as well as the much-anticipated new F-150, both scheduled for 2020 releases.
Details could be revealed when the company releases first quarter earnings Tuesday.
Cash is the key to survival during these uncertain times for any manufacturer, especially automakers. Ford spokesman T.R. Reid said these are the steps Ford has taken:
• On March 19, Ford notified lenders it would be borrowing a total of more than $15 billion against two existing lines of credit.
• On April 13, Ford announced its preliminary first quarter results, saying the dividend would be suspended, the company had $30 billion in cash on its balance sheet as of April 9 and the company believed it had sufficient cash to last through at least the end of September without restarting production or taking additional financing actions.
• On April 17, Ford issued $8 billion in bonds to further increase financial flexibility.
The company’s credit rating was downgraded in March, which has the same negative effect on a business as it does on an individual with bad credit: Getting capital can be hard.
Ford points out its disappointing profits included one-time pension and global restructuring costs. It also included $47 million paid to 2,666 owners of Ford Focus and Fiesta automobiles with defective transmissions who settled a class-action lawsuit with the company. Meanwhile, an estimated 2 million consumers have been notified that they’re entitled to financial relief from Ford so those costs will bleed into 2020.
The automaker’s net income in 2019, or profit after taxes and other charges, was $47 million, down from $3.7 billion in 2018 and $7.7 billion in 2017. Ford said in January its net income would be affected by a $2.2 billion charge related to pension obligations, calling it a bookkeeping adjustment.
Yet it was during this “disappointing” period that Ford compensated its top executives with salary, incentive bonuses, stock and other perks that exceeded the company’s annual net profit, including paying two chief financial officers, according to documents filed with the SEC:
• CEO Jim Hackett: $17.36 million in 2019, slightly down from $17.75 million in 2018.
• Executive Chairman Bill Ford: $16.76 million, up from $13.83 million in 2018.
• Stone, who was hired April 15 and assumed his CFO role June 1: $8.32 million.
• CFO Bob Shanks, who was replaced by Stone: $8.32 million, down from $8.42 million in 2018 when he was the only CFO.
• Jim Farley, then-president, New Business and Technology and Strategy: $8.36 million, up from $5.86 million in 2018.
• Joe Hinrichs, then-president, Automotive: $11 million, up from $5.81 million.
“These compensation packages are baked-in formulas,” said John McElroy, longtime industry observer and “Autoline After Hours” host. “They’re still very well compensated for an absolutely abysmal year.”
This Tuesday, Jan. 17, 2017, photo shows a Ford sign at an auto dealership, in Hialeah, Fla. Ford Motor Co. says a change in the way it values pension assets will cut 2016 full-year net income by $2 billion. (AP Photo/Alan Diaz)