The Wall Street Journal - 20.03.2020

© 2020 Dow Jones & Company. All Rights Reserved. ***** THE WALL STREET JOURNAL. Friday, March 20, 2020 |B1

BYELIZABETHWOLLMAN

Ex-Google

Car Project

Engineer in

Plea Deal

Ford Motor Co. said it

would shore up its balance

sheet by drawing on credit

lines and suspending dividend

payments, a signal of the

looming financial damage fac-

ing global auto makers as the

Covid-19 pandemic continues

to depress sales and shut down

manufacturing lines.

The company also withdrew

its guidance for 2020 issued in

early February, citing eco-

nomic uncertainty, and plans

to provide a new outlook next

month. Ford had forecast ad-

justed earnings per share of 94

cents to $1.20.

The automobile giant told

its lenders it would draw down

the entirety of two lines of

credit—$13.4 billion from a

corporate credit facility and $2

billion from a supplemental fa-

cility—to boost its cash posi-

tion as it temporarily shuts

down plants in North America.

Ford also suspended its div-

idend for the first time since

before the financial crisis, a

move aimed at improving fi-

nancial flexibility in the short

term, it said. The dividend sus-

pension could save the com-

pany roughly $2.4 billion an-

nually.

The economic fallout from

the widening pandemic has

prompted auto analysts to

scrutinize auto makers’ bal-

ance sheets to assess compa-

nies’ preparedness for a severe

drop in production.

Ford, the U.S.’s second larg-

est car maker by sales, was al-

ready wrestling with falling

sales, troubles overseas and a

slumping stock price before

the health crisis hit.

Chief Executive Jim Hackett

had been fending off questions

from investors about the pace

of his plan to reverse a years-

long profit decline. Ford has

missed Wall Street earnings

forecasts in three of the past

five quarters, battering shares

even before the recent corona-

virus-driven selloff. Some ana-

lysts in recent days have ques-

tioned whether Ford would cut

its dividend to preserve cash.

Making cars is a capital-in-

tensive, low-margin business;

auto makers typically carry

global operating margins of

less than 10%, leaving car com-

panies vulnerable to sharp eco-

nomic downturns.

“While we obviously didn’t

foresee the coronavirus pan-

demic, we have maintained a

strong balance sheet and am-

ple liquidity so that we could

weather economic uncertainty

and continue to invest in our

future,” Mr. Hackett said in a

statement.

Ford last suspended its divi-

dend in 2007, ahead of the last

financial crisis, during which it

narrowly avoided bankruptcy.

It was restored in 2012.

Ford’s decision on Wednes-

day to temporarily close all its

factories in North America

through at least March 30 will

have an immediate financial

impact because car makers

book revenue as soon as they

ship vehicles from the plant to

the dealership.

The company relies on the

North America market and its

in-house lending arm for virtu-

ally all of its global profit, hav-

Please turn to page B2

BYMIKECOLIAS

ANDMATTGROSSMAN

TECHNOLOGY: SAMSUNG’S SHIFT AWAY FROM CHINA LOOKED SMART, THEN CORONAVIRUS HIT B3

S&P2409.39À0.47% S&PFINÀ2.25% S&PITÀ1.11% DJTRANSÀ1.54% WSJ$IDXÀ1.38% LIBOR3M 1.195 NIKKEI16552.83g1.04% See more at WSJ.com/Markets

BUSINESS & FINANCE

INSIDE

Anthony Levandowski, the
engineer charged in August
with 33 counts of trade-secret
theft from Google’s self-driv-
ing car project, reached a deal
with U.S. prosecutors in which
he will plead guilty to one
count and the remaining
charges will be dropped.
According to a court filing
Thursday, Mr. Levandowski
will plead guilty to the last
count in the indictment,
charging him with theft and
attempted theft of trade se-
crets related to “Project
Chauffeur,” as Google’s auton-
omous vehicle program was
called at the time.
Specifically, Mr. Levan-
dowski said that he down-
loaded a weekly update for the
program “with the intent to
use it to benefit someone
other than Google,” the legal
filing shows.
“Mr. Levandowski accepts
responsibility and is looking
forward to resolving this mat-
ter,” Miles Ehrlich, a lawyer
for Mr. Levandowski, said in a
statement. “Mr. Levandowski
is a young man with enormous
talents and much to contribute
to the fast-moving world of AI
and AV and we hope that this
plea will allow him to move on
with his life and focus his en-
ergies where they matter
most.”
Mr. Levandowski left
Google’s self-driving car unit,
Waymo, in 2016 and helped
start a company soon acquired
byUber TechnologiesInc.
Google parent Alphabet
Inc. sued Uber in 2017, claim-
ing that Mr. Levandowski stole
more than 14,000 confidential
files before leaving Google.
Waymo and Uber settled the
lawsuit in 2018, but not before
the judge in the case asked
federal prosecutors to investi-
gate Uber and Mr. Levan-
dowski over possible trade-se-
cret theft.
“Mr. Levandowski’s guilty
plea in a criminal hearing to-
day brings to an end a seminal
case for our company and the
self-driving industry, and un-
derscores the value of
Waymo’s intellectual prop-
erty,” a spokeswoman for
Waymo said in a statement.
Please turn to page B4

The crisis has erased nearly

70% of Boeing’s market value

in 2020 and threatened its

production. In response, the

company has pushed for a $60

billion package to support it

and the aerospace manufac-

turing sector. It also is pre-

paring for a potential halt in

production amid the outbreak.

“Nobody’s flying,” a Boeing

official said. For example,

Delta Air LinesInc. this week

said it had cut 70% of its fly-

ing until demand improves

and is parking 600 jets, two-

thirds of its fleet. It won’t

take any new jets this year.

Airlines are deferring deliv-

Please turn to page B2

BoeingCo. is considering
cutting its dividend and possi-
bly laying off workers at its
jetliner plants, people familiar
with the matter said, as
America’s largest manufac-
turer grapples with an un-
precedented disruption to the
global airline industry.
The coronavirus-driven col-
lapse in passenger traffic has
forced airlines to park hun-
dreds of planes and left them
unwilling to take new ones,
even as Boeing works to over-
come the yearlong grounding
of its 737 MAX.

BYANDREWTANGEL
ANDDOUGCAMERON

Boeing Weighs Layoffs

And Cut in Its Payout

CompositionofS&P/LSTALeveragedLoanIndexbysector

*Rated Ba1 to B2 †Rated B3 and below Note: Data as of March 18

Sources: S&P Dow Jones Indices (index); Moody's Investors Service (market share); S&P Global Market Intelligence (weighting)

Computers&

electronics

15.7

Industrial

14.0

Healthcare

12.0

Media

7.1

Telecom

5.2

Other

5.2

Food&

beverage

4.1

Entertainment

&leisure

4.0

Gaming&hotel

3.8

Oil&gas

3.2

CenturyLink

0.43

Refinitiv

0.57%

Berry Plastics

0.37%

Dell

0.41

Western Digital

0.41

Caesars Entertainment

0.39

Restaurant Brands

0.47

Envision Healthcare

Univision Communications

Johnson Controls

Power Solutions

0.36

Services/retail

20.4%

SECTORS

SOME NOTEWORTHY COMPANIES

Building

materials

2.1

miningMetals&

1.2

Forest

product

1.0

Real

estate

0.9

Hundreds of companies

have spread risk in the

U.S. economy by

borrowing $1.2 trillion

in junk loans.

0.38

0.36

Leveraged-loan prices are plummeting, punishing investors who piled into the

debt in recent years. Companies with the worst credit ratings now make up a

record 38% of the leveraged-loan market.

S&PGlobalLeveraged

LoanIndex

2250

1750

1850

1950

2050

2150

2015 ’16 ’17 ’18 ’19 ’20

100%

0

20

40

60

80

2000 ’05 ’10 ’15 ’19

Leveraged-loansector

marketshare

Strongest-rated companies*

Weakest-ratedcompanies††

until we see a peak in cases,

we’re not likely to see the mar-

ket bottom,” Mr. Kleintop said.

In the U.S., data have al-

ready shown the pandemic tak-

ing its toll on the economy.

The number of workers apply-

ing for first-time unemploy-

ment benefits jumped to the

highest level since September

2017, Labor Department data

Please turn to page B11

the Nasdaq Composite gained

160.73 points, or 2.3%, to

7150.58, boosted by a rally in

technology companies.

“This is a market that has

nothing to hold onto to steady

it,” said Jeffrey Kleintop, chief

global investment strategist at

Charles Schwab.

It was reassuring to see

central banks and government

officials step in to try to en-

sure the stability of the finan-

cial system and slow the

spread of the coronavirus. “But

stop U.S. money-market mu-

tual funds and extended its

currency-exchange program

with other central banks, while

the Bank of England lowered

its benchmark interest rate to

a record.

Markets have nevertheless

remained volatile—with the

Dow Jones Industrial Average

sliding more than 700 points

before it turned sharply higher

Thursday. Investors and ana-

lysts have attributed the

swings to uncertainty about

U.S. stocks jumped Thurs-

day after central banks de-

ployed a flurry of emergency

measures to buffer the global

economy from fallout from the

coronavirus pandemic.

Policy makers have moved

aggressively this week to try to

stop strains in funding markets

from aggravating what they

believe will already be a severe

halt to economic growth.

In the last 24 hours, the

Federal Reserve has launched a

new lending facility to back-

whether central banks’ actions

will be enough to offset shocks

rippling through the financial

system and economy.

The blue-chip average

ended the day up 188.27

points, or 0.9%, to 20087.19.

The S&P 500 advanced 11.29

points, or 0.5%, to 2409.39 and

ByAkane Otani,

Caitlin Ostroff

andXie Yu

Stocks Perk Up After Central-Bank Actions

Serious strains are starting

to appear in the $1.2 trillion

market for loans to high-risk

companies, which have bor-

rowed record sums in recent

years as investors chased big-

ger yields.

The market, which survived

the 2008 financial crisis, has

become overstretched since

then, say regulators and econo-

mists, who worry that it is now

so big and risky its problems

could amplify any economic

damage caused by the corona-

virus crisis.

“What I’ve always worried

about is that the existence of

overleveraged corporations will

exacerbate a downturn that oc-

curs for any reason,” said for-

mer Fed Chairwoman Janet

Yellen in an interview.

Years of low interest rates

and easy credit have allowed

companies across the board to

borrow big, building a record

$10 trillion mountain of debt.

Lenders expect most of that

money to be repaid on time.

The epicenter of risk in-

volves a subset of that total:

$1.2 trillion in leveraged loans,

junk-rated debt secured by cor-

porate assets much like mort-

BYMATTWIRZ

ANDNICKTIMIRAOS

gages are backed by homes.

The market has exploded, bal-

looning by almost 50%—or

$400 billion—since the start of

2015, as investors desperate for

the high interest payments

these loans provided threw

cash at borrowers.

Private-equity firms fueled a

lot of the growth, borrowing

billions at a time to buy brand

names includingDell Technol-

ogiesand Staples Inc. Smaller

but relatively stable public

companies like car supplier

American Axle & Manufactur-

ing Holdings and electrical

supply makerAtkore Interna-

tional GroupInc. also took out

leveraged loans to fund share

buybacks and acquisitions.

The banks that make such

loans rarely hold on to them

now because of regulations

passed after 2008. Instead they

sell the debt directly to money

managers or repackage it into

complex securities that are

marketed to investors around

the world.

When prices of the loans

drop, or they fall into default,

the losses hit pensions, insur-

ers, and scores of mutual funds

and hedge funds, some of

which react by selling out, ex-

acerbating market swings.

In addition, investors be-

come less willing to buy new

loans and the banks that ar-

range such deals stop making

new ones. That can be com-

pounded by sharp losses in the

complex securities Wall Street

Please turn to page B10

Corporate

Debt Poses

Financial Risk

Market in junk-rated

leveraged loans shows

strains in a sign of a

looming credit crunch

Ford Halts Dividend, Taps Credit Lines

Ford has withdrawn its profit guidance for 2020. A Lincoln Corsair Grand Touring hybrid SUV.

PATRICK T. FALLON/BLOOMBERG NEWS

 Intelligent Investor: What

volatility does to a brain..... B5

BUSINESS

Tesla temporarily

shuts its lone U.S.

auto-making plant.B4

PERSONAL TECH

Is Wi-Fi at home

slowing you down?

There are fixes.B4

EMIL LENDOF/WSJ