Tick tick tick. “Ford finished the year with cash reserves of $13.4 billion as it tries to avoid borrowing money from the U.S. government,” Automotive News [sub] reports. So, if the cash burn continues at the pace of the last three quarters—and why wouldn’t it?—Ford has fewer than six months (June ’09) before it’s running on fumes. Fewer, if you consider that the ailing American automaker needs a $10b pad to keep the lights on. More, after they tap their remaining credit reserve. Which they’re doing as I type. OK, let’s drill down.
“Ford said it is immediately drawing down $10.1 billion in available credit lines because of concerns about the instability of the capital markets and the uncertain economy. The company reported a net loss of $5.9 billion for the fourth quarter, compared with a loss of $2.8 billion a year earlier, capping its third straight year without a profit. The pre-tax operating loss, excluding special items, was $3.7 billion, compared with a loss of $620 million during the same period in 2007.”
Ford: Hakuna Matata.
“Drawing down the $10.1 billion would give Ford overall liquidity of $23.5 billion, minus the amount of cash spent thus far in January. Based on its current assumptions, Ford continues to say it has adequate liquidity to fund its business plan.”
I’d like a closer look at those assumptions. Perhaps a GM and Chrysler bankruptcy is one of them. If their cross-time rivals file C11, would Ford have to file? Yes. [Ford Death Watch under construction]
When I was born in 1957, my dad worked at Mercury (Ford Motor Company) as a repairman (with the lack of quality in engineering and slapdash work done in the Wayne plant at the time, he was a very busy beaver).
As I told my elderly dad a few weeks ago about this whole scenario, if I thought that one deal would really truly help Ford, I’d actually consider getting “something” when the lease ends on our Hyundai in June.
But since I tend to think things through “right to the end” my conclusion was that in a triage situation, you may as well put your efforts into whomever has the best chance of survival; otherwise if you don’t, no patients may live.
Dad got it. 99% chance it’ll be another Hyundai for us. I’ll look at the Mazda 6 – maybe (though the last time I specifically looked at/bought a new vehicle because it was actually made in Michigan, I was sorry after owning it awhile – it’s a new 2007 Clipper pop-up camper). Embarrassingly enough I have to say that, being born & bred in Michigan.
Sorry, Ford. You get to sink or swim without me. Perhaps, just perhaps if you hadn’t made such drek in the form of a 1960 Ford Falcon (which permanently turned my father away from your products), or such drek in a 1975 Ford Pinto (my first new car – I should have not bothered with any Fords after that) and my final Ford product, a 1990 Lincoln Town Car (was THAT the best you could do for the top-of-the-line car?), then the story for my family might have been different today when you obviously need every sale you can get.
I do hope Ford makes it through the tunnel (and that the light at the end of the tunnel isn’t a high speed train…) but I have my doubts.
As for GM and Chrysler, “ditto” to the 10th and 100th powers respectively.
Funny, the MSM covering the markets have responded thinking its good news because the cash burn rate has reduced, and the futures for the day have dropped less than they would have because of Ford?
I’ll never figure this out! So I come here for the Truth :)
You have to spend money to make money. Incentives, advertising, ramping up for a huge new product blitz this spring/summer, all of these are going to cost Ford, but all of these are necessary to make profits in the future.
Well, yeah, “you have to spend money to make money”… but you need to do so with a firm eye fixed on making a profit. What does it help if Ford spends 10 billion dollars in a quarter on materials, wages, etc., all inclusive, and, yet, only brings in 4.5 billion dollars total (wow, that’s a loss of 5.5 billion.
The ship is sinking slower! Yay it’s slower sinking ships for everybody!
I applaud the progress made so far, but don’t think that they’ll be able to tread water long enough to entice the customers to rescue them.
“If their cross-time rivals file C11, would Ford have to file? Yes.”
Maybe, which is why Chrysler should be allowed to go directly into Chapter 7 (as it should have months ago, since it is an insolvent, trivial company).
I say allowed to go into Chapter 7, not using this “forced” rhetoric that the Detroit automaker apologists use. In a market society companies are “allowed” to fail. If you don’t like it join the Communist Party and try to have a revolution.
Don’t wrap yourself in the flag and spew dillusions of how your parastic company is productive.
I love how the pretend to be tough special interests go left of Marx as soon as their outdated, mismanaged company is insolvent.
I think Ford could survive a Chrysler liquidation, and then do well from getting most of their market share.
Every time the government helps a failed company it harms a viable one.
Hopefully the government will pull the plug on Chrysler before it gets back to making its awful cars; that will minimize the number of fire sale Chyrslers that have to go on the market.
Ford had the “better” sales numbers of the Bigish3 in the 4th quarter, with a very slight gain in market share. They also claimed good performance on supposedly profitable F-150 sales.
When do GM report? My God it’ll be ugly.
Incentives, advertising, ramping up for a huge new product blitz this spring/summer, all of these are going to cost Ford, but all of these are necessary to make profits in the future.
Just wait for auto prices to crash when automakers work to jettison unsold inventory at the nations ports and hidden lots around the country.
Can Ford maintain a profitable price point when backlogged Toyota/Honda/VW cars flood the market to recover any nickel or dime from the sunk costs?
Ford will pay dearly just like everyone else.
// Every time the government helps a failed company it harms a viable one. //
That is a great quote.
The truth about cars.
Some here have selective memory.The early Hyundais ect.,etc. were no gems.
I recall those good ole days.They were different times, different standards.
ALL cars are better built today including Ford vehicles.
RF et al..
Cut the poor guys some slack! I will be the first to assert that a reputation is a hard thing to shake, but here is a company trying to do everything right – fuel efficient vehicles? check (and not two years out – now!); bringing over a bunch of the Euro-market toys we have been clamoring for? check; keeping their mitts off our tax money? check! (or, more accurately- NO check!)
They $10b they just tapped is a real-live loan, like all business get, and will have to be paid back in a normal-business like manner. What is wrong with that?
They can’t create sales in the midst of this financial debacle (and neither can Toyondasan) so they may die off anyway, but they should get a hell of lot of credit for doing what they are doing.
RetardedSparks:
The fact that FoMoCo’s loan is NOT from my taxes thrills me to the core. And there’s no question that Ford’s making the right moves. But I reckon it’s too late.
Which means that the Ford-sponsored meme– WE don’t need federal help– is wishful thinking. It’s only a matter of time, and not much of it, before they join Chrysler and GM (if they’re still around) at the federal trough.
Oh wait! They were already there! So why was that, then?
Menno,
I know you like your Hyundai, but to condemn Ford for cars built over 40 years ago (and using TODAY’S standards of reliability to condemn them), while overlooking what Hyundai was building as recently as 10 years ago doesn’t hold water with me.
Ford isn’t building the Pinto anymore, just as Hyundai isn’t building the Excel in 2009.
Today’s Ford lineup is quite good, and set to get better with an improved Fusion and Mustang and an all-new Taurus just around the corner. Then comes the new Fiesta, followed by an all-new Focus, and if the European versions are any indication, they will rank at the top of their respective classes.
And while I’m as concerned about Ford’s cash burn as anyone else, let’s remember that Ford has accelerated its product rollout. At least it is burning cash with the hope that its efforts will be rewarded in the future.
Here’s what I don’t quite get about Ford’s play: They’ve decided to take somewhat of a gamble by not taking bailout bucks, perhaps under the assumption that if it doesn’t work for GM, everyone has to file C11 anyway and they come away cleaner on the PR side, plus with less government input into product decisions.
That said, shouldn’t Ford be on every corner in America shouting. “We’re not taking your tax dollars and the other guys are!!”? I expected to see every Ford ad for months take this angle, and I think they’re missing a PR opportunity by not doing it. Or am I the one missing something here?
duker, not only do I have a long memory, but I am also a slow learner.
I gave GM, Ford, AMC and Chrysler from 1973 to 2002 – 30 years – of my money and pretty well look back and figure I wasted most of it by believing their hype.
I should have done what my dad suggested and worked my tail off, saved cash and bought a Mercedes 240D, and drove it for 28-29 years. I’d have come out WAY ahead. Now, of course, it’s way too late as Daimler-Benz, or Mercedes-Benz or whatever they call themselves now, don’t built a product that is worth a Chrysler, but still charge boucoup money for the stupid things. Not for me.
geeber, I actually do hope Ford survives. But you know, you can wish (or hope) in one hand and do something else (relating to wet bodily functions) in the other and guess which one fills up first?
MMH:
They can’t do that ’cause they’ll lose face when they DO take federal money. I mean, “bridge loans.” Whatever.
The best way to ensure the survival of Ford and maybe a large portion of GM is to bankrupt and liquidate Chrysler today. Why keep the Chrysler charade going?
@ PeteMoran :
“They also claimed good performance on supposedly profitable F-150 sales.”
F-150 sales are 100% profit. The only problem is that they used to sell 650K F-150’s per year, now its looking more like 500K and falling.
Add to that the precipitous decline of Edge sales, the near total elimination of SUV sales (save Escape), and the complete bomb of the D3 platform variants and Ford has only the razor thin margins on C/D3 variants and Focus + what remains of F-150 to keep them alive. Meanwhile they are still absorbing big losses from Volvo.
Mullaly is doing the right things from a business perspective but their recent product launches have been fairly disasterous, F-150 aside.
Further, Ford has not significantly reduced its manufacturing capacity and still has Visteon, nee ACH-LLC sucking funds, massive legacy costs, loan payments on the $23B and counting secured lines of credit, VEBA payments, etc.
Even without having to stop selling F-150’s altogether meet CA fuel economy regs, Ford faces a severe uphill battle that demands much more cost cutting and several home run products to even get to the point where they can start paying back the money they owe.
@ RF
But Ford is gambling (er, taking a calculated risk) by not taking the cash in the first place. If they thought they’d need it 6 months after GM and Chrysler got theirs, they’d have taken it initially, if for no other reason than to not blow the opportunity cost of having the extra cash. By not taking the cash in round one, they signaled a longer-term intention to not take any, and they’ll lose face on the about-face either way.
I’m just sayin,’ if I was a Ford marketing type, I would’ve been pushing it a little harder is all. “Nice Silverado, Howie. Did you know $xxxx hard-earned American taxpayer dollars go into each one?”
Perhaps I’m in the pollyanna camp, but I too believe we should cut Ford a little slack. Yes, Mulally slummed it with his crosstown “rivals”, but clearly he’s the only one with management and leadership experience successes. The other two should be shit canned ASAP, especially the dunce at Chrysler.
“Chrysler should be allowed to go directly into Chapter 7”
No kidding. Any self respecting triage nurse would have called hospice care for them already.
John Horner: “Any self respecting triage nurse would have called hospice care for [Chrysler] already.”
Not the hospice. The morgue.
Following the medical metaphors……..Let’s not forget the shot-in-the-arm from the upcoming sale of Volvo………
MMH
I have the same question. The way I see it is this.
Ford had to go to DC showing solidarity because the other 2 going under really would hurt Ford, too, probably fatally. In addition to the fact that by playing along, they can gain whatever benefits are coming along in terms of labor concessions, etc, AND, if they are lucky, have none of the strings attached to the govt funds.
As for not gloating, I think these guys are all too interconnected for it to be OK to dance on another’s grave. Of course, in the scenario where Ford ends up going to the trough themselves later, they’d look amazingly stupid. They probably know they’ll end up there, hence no bragging.
I think the reason you’re not seeing it advertised is exactly as RetardedSparks said. Everyone (Detroit and every other auto company) is in this boat together right now, and you almost can’t afford to go stomping on anyone else, even if you can do it.
Case in point: Toyota is struggling just as mightily as everyone else. However, they should remain in business. They could easily be using this angle as “why buy from those other guys when they might not be in business in 6 months?”. But they don’t, because a fall of any of them means a fall of vitally important suppliers to Toyota as well, and at this time, in this market, Toyota just can’t absorb a big-supplier bankruptcy. Its in everyone’s interest AT THIS TIME for everyone to make it through this downturn.
Ford is playing it smart. If they can hold out even another 3-6 months, a lot of additional questions should be answered regarding GM and Chrysler, and likely any big-time concessions those two get anywhere will also be given to Ford. If they can let those 2 companies do the dirty work, Ford can basically benefit for free. But within that time frame, we should especially know where Chrysler is going. For them, its basically whatever the gov wants for them is gonna happen. And I’m not so sure the gov is gonna go for this Fiat garbage (problem number 1 with this bailout is going to be the “no non-american jobs/partnerships/investments, etc”…which is going to cripple GM and Chrysler on competitive pricing….especially Chrysler since they don’t have really much of a foreign division as GM or Ford have. It will be a lot easier for GM to convince the gov that they need to use money to source, say, diesel engines from europe being that they are sourcing from GM-Europe and not somebody like Fiat.
I hope Ford makes it. I really do. I really love their new stuff, and their quality is tops. And if they can get to 2,3,4 years down the road, the NOT taking of federal bailout bucks can then be used as more marketing, and even in those upcoming years, trust me, it will have a big psychological effect on car buyers even if the bailout was years in the past. Not to mention the feeling of pride and morale booster to the company to know that they made it through, on their own, by doing everything right. It could be a really really inspirational business turnaround/success story. Americans love an underdog that turns into a winner.
@Jerome10
“Americans love an underdog that turns into a winner.”
I’ve seen this before…
Volkswagen – 1950’s & 1960’s
Toyota & Honda – 1970’s & 80’s
Hyundai – 1990’s & 2000’s
Who knows, maybe it is Ford’s turn at the plate.
I work for a Ford dealer and the owner of my dealership has been keeping us in the loop for the past year and a half about what’s going on at Ford. Our owner has a close relationship with FoMoCo and sits on their dealer product committee as well as being the president of NADA in our state.
Basically, Ford is trying to make sure as many expenses as possible end up showing in 08. Everybody is expecting bad news now and it will make us look better for ’09 and ’10.
That being said, it doesn’t mean that we don’t have a tough row to hoe. The strategy is basically to survive ’09 and get past the costs of bringing our new vehicles to market and the massive employee buyouts we have been paying out. We already have a better labor contract that kicks in in ’10 and we expect to benefit from any additional concessions that the UAW gives to Chrysler and GM.
What makes us hopeful is Ford is moving forward with a strategy based on profitable products that people want to own and streamlined global production and supply chain processes. Mulally knows that our only chance to win is to follow through on the plan Ford has laid out and we are feeling pretty good about the fact that Ford is following through. Even if Ford ends up not making it (which I doubt), they’re doing it the right way.
GM is really barely starting to implement the same plan that Ford started on in ’01 (even before Mulally) and has fine tuned since then and Chrysler (Cerebrus) seems to just be looking for an exit strategy.