In the autoblogosphere, Ford gets brownie points for not sidling up the federal bailout buffet. This despite the fact that FoMoCo CEO Alan Mulally sat shoulder-to-shoulder with GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli at the pre-trough-snuffling congressional hearings. This despite the fact Big Al has lined-up a line of credit just in case he has to roll up one of those million dollar bills Ford pays him. Unfortunately, out there in the real world, consumers hear “Detroit Bailout,” not “Chrysler and GM Bailout.” Which is, coincidentally enough, fair enough. Ford is in deep shit. MSNBC ran the numbers; they’re bad enough for Uncle Sam to hide the checkbook. As if. If only. OK, here we go. . .
Looking over Ford’s financial statements, reason for confidence is hard to find. Income from Ford’s financing arm, historically a rare bright spot on Ford’s deteriorating balance sheet, swung to a $300 million loss. Inventory is up by $2 billion, and the plummeting value of used cars cost its leasing business $2.1 billion. Ford lost $2.46 per share solely in the last quarter—more than its entire current market capitalization. This year’s forecast anticipates the worst sales in decades, and Ford’s 40 percent revenue decline in January suggests that even its current-year prediction may be overly optimistic. Most serious of all is the $21.2 billion in cash the company chewed through last year. If the company keeps spending at that rate—though it insists it won’t—Ford will face a liquidity problem before the end of the year…
Having triple the cushion of GM, however, doesn’t give Mulally much padding. By the end of the fourth quarter, Ford was down to $13.4 billion in cash on hand, an amount that would have brought Ford near its minimum capital requirements by the end of this quarter. To fill the gap, Ford has exhausted its remaining credit lines. (It withdrew the money now, the company said “due to concerns about the stability of the capital markets”—possibly a reference to the several hundred million dollars in guaranteed credit it lost last year when Lehman Bros. went under.
Brrrrr. That was some cold shower. Uh-oh. Here comes the stinky cologne: MSBC’s Jeff Howitz wants Ford to hit-up the taxpayer sooner rather than later.
Seeking more from Washington than a line of credit would be a blow to Ford’s pride. But given the new administration’s preoccupation with halting job loss at all costs, it’s hard to imagine a better time to bargain.
In 2006, Mulally recognized the chance to borrow cheap money when he saw it. If he’s serious about repairing Ford, it’s time to join GM and Chrysler in Washington—and give up on the idea that Ford is in “a different place.”
Pride goeth before a bailout? Someone should tell Wagoner and Nardelli.
The only mistake Mulally has made so far is not dumping Volvo when he had the chance. The One Ford plan is coming along nicely, and the products are in place for the next 3 years – all funded (which is why the cash burn was so severe). Ford actually put some real cash into the VEBA already, and showed up its rivals by reaching an agreement with the UAW 1st.
Is there a prize for being the best of the worst? Do the laws of economics get suspended because you are two funerals behind in scheduled trips to the grave yard?
Yes Ford saw the downturn quicker and reacted faster, but to what end?
This idea that the former big three can survive with answers like, look at the Japanese there in the same boat. Oh no they are not. Toyota will lose in a year what GM can do in a month. Toyota also has huge reserves which will allow it to finish off the Detroit three,
Here is how; while Detroit and the Japanese are cutting production and staff, I can assure you only the Detroit builders have cut back or frozen new development. The Japanese and German builders will go full speed ahead with their plans for new products.
When these products hit just when Americans are buying new cars again, they will widen their lead on sales. No $40K plug in car will match newly designed accords, camrys, etc. An old coach said you can’t beat somebody with nobody.
. . . despite the fact that FoMoCo CEO Alan Mulally sat shoulder-to-shoulder with GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli at the pre-trough-snuffling congressional hearings.
I’m pretty sure they were all under subpoena to the committee. This makes it sound like Mulally didn’t have to be there but chose to instead.
What a great photo!
Ah, the good old days.
The Ford family via the ownership of a small amount of stock controls the company with the special rights those shares provide them. Would anybody hire Billy jr. to run an auto company if his family didn’t control it?
If the government provides billions are they likely to allow the Ford family to retain control? Just might be why Ford has not bellied up to the trough.
When being chased by a bear, you only have to be faster than the other person attempting to outrun the bear. If Chrysler goes away, it will give both Ford and GM some breathing room.
As much as I am not a fan of Ford for its past fiery recalls and checkered safety history…Ford I believe actually gets it. They are miles and miles ahead of their domestic brethren with attractive cars with good reliability, handling and modern engines / drive trains. They have been able to off load Rover and Jaguar and they only have 5 brands and the ability to still sell off Volvo (as it is actually worth something compared to Saab). Mercury should still need to be axed as it has no distinguishing value beside being a Ford showroom with waterfall grilles. Fords Hybrids actually work and are not the half assed GM attempts and they actually have a competitive small car (Focus) with the Fiesta coming soon. Ford also will have a new major seller this summer in the Transit Connect (why they didn’t bring it over sooner I’ll never know). Mulally is the product of an educated and competitive CEO who understands the business – he is not an inbred, closed minded, bean counter brought up in a sheltered culture such that is running GM. Of the D3 – Ford has the best chance of surviving and seems to be worth it.
While past decisions have left Ford in a precarious position, Mulally has handled the most important part of the business quite well. Unlike GM and Chrysler, Ford’s focus on product will most likely save the company. The new Fiesta, Focus, Fusion and Taurus all appear to be competitive products when compared to any other auto maker. If you compare this with where GM or Chrysler are going then it seems to me that Ford a much better chance of a viable future.
People that think Ford is in a better place are delusional. It’s like saying that you are ONLY paralyzed on your right side.
Ford has flushed away so much money re-skinning old models lately (Focus, F-150, Super Duty, etc), and dumping BILLIONS into the D3 platform, and they are nowhere near breaking even on those investments.
Ford is so backwards right now, they don’t know which way is up. And Volvo is going to suck this company dry.
Oh well…another one bites the dust.
I think MSNBC’s Howitz is wrong about the timing of a bailout request from Ford. If Chrysler is allowed to go C7, it will make the feds really antsy about letting any other automakers go into bankruptcy, even C11, and the federal wallets will come open much easier (if that’s even possible at this point of our cash distributing free-for-all). Just as Lehman Bros’ bankruptcy made the federal gov’t blink and run to the rescue of the banks still (barely) standing, I think a Chrysler C7 will ensure the propping-up of GM and Ford, with more political support even in the face of public opposition. But who knows for sure; not even the “experts” seem to know what’s next in this economic apocalypse.
@P71:
The Focus is a re-skin with platform updates. I can go through the steps of how it happened, but the total cost was in the $300-400M range. Not that expensive in car terms. At least it wasn’t Toyota’s twice delayed nearly $1B investment in a Corolla on the same platform that doesn’t look or drive significantly different than it used to.
The F-150 is a re-skin with platform updates, but there was nothing wrong with the F-150’s platform… there are other areas that Ford still needs to work on (see 5.0DI Coyote).
The Super Duty was not just a re-skin. There were fairly significant revisions to the platform.
The total spend on D3 cars has been about $2B-$2.5B including the yet-to-be launched Explorer. By the time the current and past vehicles get refreshed, Ford will likely have sold 1.6-1.8M vehicles (depends on the success of the Explorer) on the platform. I’m not sure how that’s a bad investment, especially when you consider the profile of customer buying the Flex and MKS (ie – foreign luxury traders, above-average wealth, new to Ford).
I don’t think anyone is in denial about Ford, but rather that they are hopeful about Ford, and want to give them just a bit of credit for making an effort.
That being said, I really think that Ford’s is secretly trying to encourage the bankruptcy of GM and Chrysler. Their relative success says to Congress “Look, it can be done, just not by the bozo’s at GM and Chrysler” thereby prompting the C11 of their main competitors. Customers will flee those brands and a decent chunk will end up with Ford. The govt will insure against a job-loss tsunami by propping up suppliers and even Ford with no-strings billions.
OK, maybe GM comes out “lean and mean” in 3 or 4 years but as many B&B have pointed out, that would be the first time in history. Ford’s just playing the odds.
That’s my tin-foil-hat rant for the day….
I do really hope Ford is making the point to the government that by not allowing Chrysler and/or GM to restructure/liquidate that they are increasing the chances that Ford is going to need money as well.
I belive Chrysler and GM are demonstrating that continued bailout money is cheaper than a bankruptcy in terms of unemployment insurance, job losses, tax revenue, etc. However, I wonder if those numbers are even considering anything for Ford. If not, they should include Ford’s needing money if Chrysler and GM are kept alive.
Ford needs the bounce from one of those two (Chrysler) going down. As much as that might suck for the economy, people I know who work for Chrysler, etc, its gotta be cheaper to do that and try to keep Ford from the money than try to prop up all 3.
Of course, maybe there’s no hope that even if Chrysler and GM C7 or C11 that it will save Ford. If they’re gonna need it anyway, suppose it doesn’t matter what you do with the other things.
Personally, I wish the gov would start letting some of these big businesses fail. All this trying to prop up with money we don’t have is just prolonging this whole mess. You want it short and painful or long and less painful (think band-aid)? I’d rather we just get it over with and get on with life, without turning America into Europe.
Jerry Weber: “…while Detroit and the Japanese are cutting production and staff, I can assure you only the Detroit builders have cut back or frozen new development. The Japanese and German builders will go full speed ahead with their plans for new products.”
How can you assure us of that? You may not have heard, but Ford is launching about a dozen new cars in the next 18 months.
I would expect that Ford’s actions include all, and more, to a greater or lesser extent, the different motives called out in the preceding posts.
However, I still think the greatest motivation is that, with a gov’t loan, the Ford Family, Inc., risks being forced to convert their Class-B super-voting stock (allows them with 4% of the equity to control 40% of the votes) into common or regular prefered. The thought of losing control, or in the event of a Ch.11 filing, outright losing your source of wealth, will force Ford to sell the china (Mazda) and silver (VCC), before letting Washington pry control (with apologies to C.Heston) “from their cold dead hands.”
The total spend on D3 cars has been about $2B-$2.5B including the yet-to-be launched Explorer. By the time the current and past vehicles get refreshed, Ford will likely have sold 1.6-1.8M vehicles (depends on the success of the Explorer) on the platform. I’m not sure how that’s a bad investment, especially when you consider the profile of customer buying the Flex and MKS (ie – foreign luxury traders, above-average wealth, new to Ford).
Ha!
Lets see:
-Round 1:
Five Hundred – failed
Montego – failed
Freestyle – failed
-Round 2:
Taurus – failed
Sable – failed
Taurus X – failed
-Round 3:
Flex – Failing (Ford said they would sell 100K of those Scions a year
Lincoln Taurus – Again, not doing so hot. Ford is charging Cadillac prices for a Buick.
-Round 4
2010 Taurus – Has a small chance of success…only because of the exterior. The interior is standard Ford parts bin…and the faux SHO will do nothing to help sales.
Explorer – Completely useless. They have the Escape, Edge, Flex, Explorer, and Expedition…they don’t need another SUV.
The D3 has been a terrible performing platform since day one. Meanwhile, the old Panther platform soldiers on as Ford’s real money maker…and sells just about as many units as the D3 too.