And there you have it. The hit from Hell, sucking the life out of FoMoCo. Automotive News [sub] brings the noise. "In the financial report, Ford said that it took $8.0 billion in special charges to write off the value of troubled assets — including a $5.30 billion charge for Ford North America. The North American unit posted a $1.3 billion pre-tax loss in the quarter compared with a $270 million loss during the same period a year ago." If not for foreign ops… "Ford said it posted a pre-tax profit of $582 million in Europe during the quarter, up from $262 million. It also turned profits in Asia and South America." If not for Volvo… "The Volvo unit lost $120 million compared with a loss of $91 million a year ago." As promised, Ford announced the truck-related loss along with its plans to turn the not-so-supertanker- anymore around. [TTAC coverage continues.]. Meanwhile, according to Bloomberg, "Ford said it had $26.6 billion in automotive cash at the end of the quarter, down $10.8 billion from a year earlier." Chief Financial Officer Don LeClair is "confident'' Ford has enough liquidity. Sorry. "One time" expenses or no, there's no way Ford can sustain that kind of loss indefinitely. It's a race against the clock, and the clock is in the lead.
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More importantly is how much cash they burned. I would guess most of the writedowns are residual losses on the leases.
While I was excited to see the product plans for Ford over the next 2 years – completely new Ford line, every car/truck redesigned, I was disappointed at the lack of a complete Mercury product plan – one new “small car” in 2010, and no new info on Lincoln.
I still believe Ford is on the right track.
…and this just in: CNBC just reported in that Ford’s Q2 revenue was $38b vs estimates of $34.99b
A cash burn rate of this scale isn’t sustainable.
Ford has a lot irons in the fire retooling existing plants. The scary part is those changes don’t come on line until 2010 – 2011.
I also noticed that the Ford Ranger Twin Cities plant received a two year extension. The Range will soldier on until 2011.
Ford will not make it, its too little and much too late, the only thing that will save them is if they get a large Hand out from Uncle Sam!
Before you all jump to EU vehicles, just remember they are engineered for Europe and not North America just look at all the Electrical problems with some EU Cars that are here now!
Again Reliability for the long term is the 64,000 dollar question!
I think the real problem with bringing over the Euro vehicles, if they are actually just importing them or even importing the parts and doing final assy in the US, is that they will not be profitable.
What Ford needs, and what I believe they have already been working on, is the creation of global platforms for the next gen of vehicles. Still the profit is going to be a lot less than what was made on trucks.
The other x factor in their finances is ACH-LLC (formerly Visteon). I’ve been trying to find information about where things stand with those plants. While this probably doesn’t show on Ford’s books, they could be on the hook for big bucks if those plants don’t sell or have to be sold for next to nothing, not to mention the transfer of parts manufacturing to other locations. Near as I can tell they’ve sold 3 plants and still have 10 more to go.
someone correct me if I’m wrong, but wouldn’t that break down to $1106 per second for the 91 days of Q2? If we took out the weekends…or even non-business hours (but as a multinational, I’ll assume a 24 hour clock) the number would be even more heinous.
Mazda?
$8.0B in special charge write-offs is NOT cash…its accounting. That charge did not play a role in the reduction of $10B in cash over the last year. The $8B charge only reduced the amount of assets on the balance sheet, that’s it.
Hence, Ford only burned $700M for the quarter. Meanwhile it has $26.6B in Automotive Cash remaining.
Doesn’t sound like the credits are rolling just yet…
But they do need some product…and customers… QUICKLY!
Once they realize they will have a very bad quarter, many businesses will go through the books and write off/write down all the crap that they have been carrying along. It makes the quarter even worse, but cleans things up for the future. Since Wall Street has the attention span of a 2 year old, all is forgotten by the next quarter and the company can move on. This seems to be what Ford is doing, and if so, the situation next quarter shouldn’t be as bad.
We know that there is a big hit coming from the drop in residual value of off-lease large vehicles. Does anyone know if this has been included in Ford’s posted loss?
I find the contrast between Ford and GM’s approach very interesting. Ford seems to have woken up and is willing to take the radical steps necessary to turn things around. It might be too late, but at least they have woken up. GM, on the other hand, continues on with business as usual, managing the downward spiral.
Wow. All I can say is “Holy shit!” to that. Not even the fuck ups at GM can manage that big a loss. Oh wait….
Really, if Ford loses this much, I can’t wait to hear how much GM lost this quarter. I bet you $5 that if Ford loses this much, GM will lose in the 10 billions.
Well in a weird way this is heartening; if they really are using this quarter to flush the bad assets out of the system, and they have that much money in the bank, I think Ford will be able to survive and bring some of their delicious Euro products home and start making money again.
drifter:
“Shipping American jobs overseas my @ss…”
Those profits in Europe and elsewhere are primarily from vehicles made locally there and with parts made locally there. It’s not like Ford is making a car in Michigan or Canada and shipping it to Europe, at least not on any large scale. So at best you have a few HQ guys in the US to support overseas ops. NOT thousands of US and Canadian factory workers and parts makers.
Wow, if the leadership at Ford had listened to us two years ago when we said to bring over the European Focus instead of slapping a few doo-dads on the old one. Maybe Mullaly does read the internets.
Given the massive wallop GM took BEFORE the $4 gas/SUV debacle this should be interesting. It’s obvious that Ford is leading the charge, they’re lately going through that door before the other 1.8 steel themselves to.
Cerberous is looking like they’re going to go up in smoke. Not only will they have write down Chryco Financial’s balance sheet but half of GMAC as well. Ugly.
What that $8b in “special charges” or as GM likes to put it “one-time expenses” amounts to is the reporting of losses from prior quarters/years that they were carrying to make the company look better in the past. But, those are still very real losses; just losses that will not effect their current cash situation since they were already paid for. Please, don’t try to tell me how they aren’t “real” losses and don’t count.
from the ford presentation:
Number of global platforms
Today Future
B seg (fiesta) 4 1
C seg (focus) 3 1
c/d (fusion) 3 1
Van 4 1
to be completed by 2011
1/2 of NA drivetrain plants will be flexible between I-4, V-6, V-8 and diesel (not further specified)
All in all they presented an actual plan with detailed accounting for what vehicles would be built where and when. In stark contrast to what GM presented last week.
Mulally and Ford are engaged – now time will tell.
Ford has $26.6 billion in automotive cash, but where did most of the money come from?
FoMoCo put up their entire company assets for a multi-billion dollar loan (over 26 billion I do believe), two years ago.
How much…if any of that loan has Ford paid off?
When does the loan come due?
So wheres the latest death watch for Ford, and come to that Chrysler with its credit crunch news? It seemed the GM one was written quickly enough after RW’s latest meet and greet with the press.
Ford is STILL making a HUGE mistake by not getting the Fiesta here any sooner. 2010 is WAY too long to wait for a car that goes on sale in Europe this fall…
P71_CrownVic Says:
Ford is STILL making a HUGE mistake by not getting the Fiesta here any sooner. 2010 is WAY too long to wait for a car that goes on sale in Europe this fall…
I bet they are spending that time reengineering it for Left hand drive, modifying it to meet US safety and emissions regulations, that sort of stuff.
@Runfromcheney
I bet they are spending that time reengineering it for Left hand drive
Exactly zero countries in continental Europe have right hand drive.
Too bad you couldn’t find or photochop a Ford clock to show two minutes to midnight…
I do hope Ford can survive this, if only because they have some interesting looking product in the pipeline, and because of the D3 actually have what appears to be some solid leadership. Their gameplan right now might be to outlast GM or Chrysler in the Chapter 11 derby and capitalize on the bounce effect long enough to get these products to market.
Speaking of product, I recall an editorial on Ford here on TTAC (maybe a year ago?) in which their prospects appeared very bleak as Ford had pretty much nothing in the pipeline. Not that much later, they have several promising things cooking. I think that speaks very well of Mulally’s leadership and determination to right the ship.
Ford took the opportunity to write down as much as possible. Those $7.6 billion in write-downs were just asset accounting. Ford’s assets and debts are still balanced unlike, say, GM.
Ford’s cash situation is actually looking ok. They only went through $2 billion this quarter. They’ve only gone through $3.5 billion in the 6 months other than the $4.5 billion VEBA contribution. At that burn rate, they can run for a while.
As for their loans, it’s just like a house mortgage. They don’t all come due at one point. Ford is paying them off over a period of years. They’ve already started – it’s nearly $2 billion of their expenses yearly. In the future, Ford will likely refinance if their credit rating improves so that their yearly expenses shrink.
Frankly, the actual operations loss was better than I feared. And the product roadmap briefly laid out made me pretty excited about what’s coming.
Ford is STILL making a HUGE mistake by not getting the Fiesta here any sooner. 2010 is WAY too long to wait for a car that goes on sale in Europe this fall…
The Europeans offered to bring Ford NA into the design of the Fiesta back in 2004, but in the tradition of the pre-Mulally days Ford NA was not interested.
Because of this when it was decided to adopt the Fiesta here there was a substantial delay for our market while the cars was re-engineered to pass NA crash standards, etc.
Now Mulally is enforcing a modified ‘World Car’ program so this type of thing doesn’t happen again. Vehicles won’t be identical in different markets, but their basic design will easily adaptable.
Ford presentation showing in detail the financial picture and future product plans:
http://www.ford.com/doc/ir_20080724_2q08_earnings.pdf
These figures are mind blowing. They are greater than the many countries overall budgets. Check out Zimbabwe – the figures must give solace to old Mugabe
Most of the one-time charge I think is for re-tooling the plants to build more flexible and fuel efficent cars. The plan is to have everything here like the euro focus and fiesta by 2010 which is all of 17 months from now.
Who know maybe chrysler will go down before then.