Wall Street Journal reporter Jonathan Weil has a history of spotting accounting rot before it blows up. He was the first reporter to question Enron’s finances, and I recently posted about Weil hammering private equity’s “fishy accounting.” Weil’s latest target: Ford Motor Co.
Weil this week called out Ford’s accounting legerdemain to justify its juicy dividends. Depending on the math, Ford’s payout yield is 5.2% — 6.4% if you include the company’s supplemental dividends. Either way, both figures are more than double the 2.5% consumer cyclical average of Ford’s peer group.
Ford uses what it calls “adjusted free cash flow” to justify these rich payouts. Weil prefers to call it “cash flow before bad stuff.” The technical Wall Street term for Ford’s financial window dressing: putting lipstick on a pig.
Taxpayer Outrage
Ford’s dividends might sound like a matter only of concern for the company’s shareholders, but U.S. taxpayers should care. Over the years, Ford has mooched some $8 billion from federal and state public troughs. And just before leaving office, former Energy Secretary Jennifer Granholm in late December finalized a controversial $9.63 billion below-market loan to cover most of Ford’s $11.4 billion EV projects in Tennessee and Kentucky.
That loan was funded through a Department of Energy program earmarked for innovative projects that couldn’t get traditional financing — not a Fortune 500 automaker with more than $180 billion in annual revenue. Granholm appointed Ford’s chief lobbyist, Chris Smith, as an advisor to the loan program months before the deal was announced. Ford’s general counsel, Steven Croley, previously held senior posts in the DOE and the Obama White House. The stench of political patronage was unmistakable.
Granholm’s sweetheart loan allowed Ford to borrow at the same favorable rates the U.S. Treasury pays. Notably, Moody’s already ranks Ford debt as junk, and Bloomberg reported in May that Ford had a “razor-thin” chance of S&P Global maintaining its investment-grade rating. A junk downgrade would force Ford to pay more to borrow — unless, of course, the loan is funded by taxpayers.
Adding to Granholm’s disgrace, Ford over the years has showered its top brass more in compensation than it paid in taxes on its billions of profits.
And what have taxpayers gotten so far? Broken promises. Ford’s Super Duty EV plant in Tennessee, once scheduled to open this year, is now pushed back to 2028. Its Tennessee battery plant, originally planned for 2025, won’t open until 2027. One of two promised Kentucky battery plants has been delayed indefinitely.
The only major firm commitment Ford has delivered on is its dividend.
Ford Family Enrichment
Ford has a dual class share structure, in which Ford family members own Class B shares that have 40% of the voting rights but represent only 2% of the total shares outstanding. Class B shareholders in 2024 received $55 million in dividends. Forbes in 2010 reported that 86 members of the extended Ford clan controlled these special shares. Based on that figure, the 2024 payout alone worked out to more than $600,000 apiece — though naturally, the closer one’s family branch to the Blue Oval, the fatter the cut.
At the very top sits William Clay Ford Jr. He controls nearly 19 million Class B shares, which at 2024’s dividend rate would have delivered around $11 million in cash — on top of the $20 million he collected as executive chairman, a role I’d guess mostly entails overseeing CEO Jim Farley and managing board proceedings. Farley himself hauled in $25 million last year and has pocketed more than $107 million since taking Ford’s corporate wheel five years ago.
Much of Farley’s compensation was stock, so if Ford’s shares decline, so does his personal fortune.
For Bill Ford’s distant cousins, there’s less, but still plenty: hundreds of thousands of dollars a year simply for being born into the family. That’s why the dividend is existential. It sustains Palm Beach lifestyles as much as it secures control of Dearborn. If the spigot slows, it could shake both fortunes and the family’s loyalty to the company.
I’m told the youngest generation of the Ford family isn’t emotionally tied to the company. If they have even a modicum of pride, I’d expect they’d be bothered by having their family name being synonymous with shoddy manufacturing. Ford has been the industry leader for safety recalls for several years running – some 90 already this year, including recalls for repairs performed on earlier recalls.
“Widows and Orphans”
Ford also has an unusually high component of individual investors for whom Ford isn’t a growth story. Unlike Tesla, which draws believers in its technological future, Ford has long been considered a “widows and orphans” stock — owned for steady income, not faith in its auto manufacturing prowess.
Ford’s share price rests heavily on its ability to deliver its dividend checks. If the payouts are trimmed or cut, so likely would the share price, because the expected dividend payments are what keeps investors hanging on.
Hocus-Pocus Accounting
Weil exposed just how far Ford is stretching. The company used the free cash flow – money left over after paying operating expenses – it generated in 2024 to justify its 2025 first-quarter dividend — the equivalent of using last year’s paycheck to prove you can pay this year’s mortgage after your boss cut your salary. Ford expects to generate less free cash flow this year, a shortfall it partly blamed on Trump’s tariffs.
For the first half of this year, Ford reported just $1.3 billion in adjusted free cash flow while paying out $1.8 billion in dividends: a $600 million supplemental dividend in Q1 plus two regular dividends of about $600 million each. Ford paid its supplemental dividend even as Farley was warning that tariffs would “blow a hole” in the U.S. auto industry.
To justify its rich dividend payments, Ford excluded $209 million in restructuring costs (including severance for laid-off workers) and $515 million in pension contributions. It also counted $110 million from derivative settlements and shifted $700 million from Ford Credit to its automotive arm. Finally, it excluded unspecified “other” outflows altogether — making it, as Weil put it, “impossible for investors to parse” what’s really going on.
It’s all legal, but that doesn’t make it right. Weil’s warning: Ford “might well decide to maintain its dividend at current levels. But investors should be aware that it is stretching to do so.”
I’d wager most Ford investors are clueless about Ford’s accounting shenanigans.
PR Malarkey
Tellingly, Ford didn’t offer Weil much of a rebuttal. A spokesman who Weil was remiss in not identifying – corporate flacks should be held accountable for their lame responses – gave him a statement that the company believes “adjusted free cash flow best represents the underlying cash generation of the business.” The spokesman added: “We have an established, consistent approach to returning cash to our shareholders — something that they value — and are confident in the performance and cash-generation potential of our business to support our shareholder distribution strategy.”
Simple English translation: Just trust us. The spokesman either didn’t understand — or couldn’t address — Weil’s thesis: Any confidence in Ford’s cash-generation potential to support the company’s dividend payouts is wishful thinking.
Historical Perspective
Ford rightly takes pride in never having declared bankruptcy, unlike GM and Chrysler. That was thanks to Alan Mulally, the highly regarded CEO who succeeded Bill Ford and foresaw a major downturn, prompting him to mortgage everything — even the Blue Oval logo — to stockpile cash and save the company. In Mulally’s day, the Ford family willingly tightened its own belt to safeguard the company’s future.
Those days are over. Jim Farley is no Alan Mulally, and today’s Ford family shows little interest in financial altruism. They’re milking the company, not saving it.