Ford is helping some of its suppliers survive a cash crunch by paying its bills early to ensure that critically needed parts keep flowing to its auto factories.
The North American auto industry is just restarting after shutting down for two months to slow the spread of the coronavirus. That has caused a cash-flow crisis at many auto-parts suppliers that do not have deep capital reserves.
The European suppliers’ group CLEPA has said that small and undercapitalized suppliers could be in danger of bankruptcy from the coronavirus crisis, as they depend on payments from automakers to Tier 1 suppliers, who in turn pay their own supply chain.
Ford burned through $8 billion in the first three months of the year, but it has built up a substantial cash pile by suspending its dividend, drawing down its credit lines and selling junk bonds. Now it is helping keep key component suppliers afloat by paying invoices early.
“In light of current market conditions, Ford is creating an early-payment program for our supply base,” Jennifer Flake, a company spokeswoman, said in an emailed statement. “This new voluntary program creates access to cash flow and working capital to Ford suppliers.”
The automaker, which is projecting a $5 billion operating loss for the second quarter, said it is making these early payments to a small group of key suppliers it declined to identify. The company plans eventually to expand the program to other manufacturers across its supply base, Flake said.