Automotive News [sub] reports that Ford has less than $15b in cash, and a burn rate of “somewhere between $1.3 billion and $2.57 billion” in the fourth quarter. CEO Alan Mulally had earlier indicated that Ford had a solid $15b to work with, but a spokesman now reveals that his number is off. Ford has not closed the books on the fourth quarter yet, says Mark Truby, “however, our cash position will be lower than $15 billion. It would be premature to say anything more.” Ford is sticking by its earlier guidance that cash burn was reduced in the fourth quarter, but that’s not saying much considering the Blue Oval torched $7.7b in the third. In addition to the “under $15b” cash on hand, Ford has access to $10.7b in credit. But with nothing else to borrow against, survival until the brand’s Euro-revival takes hold could come down to a requested-but-unapproved $9b government “emergency line of credit.” Or magic. Never stop believing in magic.
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I kept hearing Journey’s “Don’t Stop Believin\'” as I read this news.
Even with the morgaged out blue oval i always felt Ford was in too close a position to GM and Chrysler with money burn and what was left over in their piggy bank to be trully safe. They played a clever game at congress staying under the radar but will that come back to haunt them? As you pointed out theres nothing left to sell to prop the company up apart from them to try and get rid of Volvo while they wait for the euros. At least GM has other items it could still try and throw on the fire. Are Ford in the weakest position now?
Not to worry, President BO will have lots of spare cash for Ford.
Even if Ford only has, say 14.3B left and access to 10.7B in credit, that puts them at 25B.
Lower burn rate than GM. From most indications, more dinero totally available than GM.
Yet somehow, GM is going to make in through 2009 without any more cash. Uh-huh.
@jkross22,
I hear Tom Petty’s Freefallin’. But that’s just me.
What a lot of people are forgetting is that although Ford (and the others in Detroit) have a lot of cash on hip and/or access to lines of credit, these piles of cash HAVE TO BE PAID BACK, maybe even at extortionate interest rates.
Which means that their “turnaround” plans can’t just be enough to stablise sales, but to expand at a phenominal rate in order to pay these loans back. And I’m not just talking about the government loans, I’m talking about the private banks who want that money back (considering they have a few cash problem, themselves).
Let’s just consider the loans Ford secured for Alan Mulally’s turnaround plan. They mortgaged EVERYTHING and came up with $25bn. Now, let’s forget interest and concentrate on the core amount. This means Ford need to pony up $25bn from somewhere. Now consider that at the height of the “SUV craze” (circa 2000), Ford was earning on average $1.93bn per quarter. Which means that Ford would need to give all their profits for 13 quarters (over 3 years) in order to pay the loans back. Now, Ford won’t do that, they’ll pay them off incrementally, which means the interest will mount up. This will not help Ford at all with their turnaround plans.
Now considering that Alan Mulally’s tenure will get Ford stable, they’ll need the next CEO to expand Ford ORGANICALLY to create the money needed to pay all these loans back. Now, top brass at Ford believe that Mark Fields is practically a shoe-in for the role…..
Expect Ford to be in a similar “cash burn” situation 10 years from now…..
According to Wikipedia, the late-1970s Ford Granada (which Obama so lovingly discussed) was meant to be “a competitor to the Mercedes-Benz [E-Class] 280.”
Obama hearts Ford. Ford is blue, and Obama has got blue state soul – enough to nominate Granmole for commerce-and-jobs czar.
@Katie,
Not everyone has forgotten. I try to explain to people all the time how many years of record profit GM would have to have, just to payback their bailout, err, loan. Ford is in a different boat, but it is also taking on water.
The only certainty is bankruptcy.
The only uncertainty is when and on what terms.
@mtypex:
“the late-1970s Ford Granada…competitor to the Mercedes-Benz..”
My first car was a 1979 green Granada. Somebody at Wikipedia is playing a major prank or is way, way over-medicated to make that claim.
PickupMan
Ford positioned the Granada as a bargain Mercedes in its advertising, but I don’t think anyone actually cross-shopped the two. Check out this vintage TV advertisement:
http://www.youtube.com/watch?v=dht4E6yBwsE
Around the same time, Fiat pitched the X1/9 as a bargain basement exotic Italian mid-engined sports car … but didn’t actually compete with Ferrari :).
According to Wikipedia, the late-1970s Ford Granada (which Obama so lovingly discussed) was meant to be “a competitor to the Mercedes-Benz [E-Class] 280.”
Never trust wikipedia. According to them, U.S. market Mitsubishi Mirages came from the factory with the same turbocharged four-cylinder engine used in the AWD eclipse.
For that matter, Hyundai advertisers compared the Azera and Sonata to the Lexus LS and BMW 5-Series, but I don’t think they expected buyers to cross shop the two either.
And here I thought the Flex was Ford’s savior.
@ P71_CrownVic: Now, that’s just mean…
Less cash than they thought? Ford has only just added up the cost of all those incentives during December.
“My cat’s breath smells like catfood”