Ford's profits plummet $8.8bn

[DanielXR8]

From news.com.au

FORD Motor Co announced on Thursday a quarterly loss of $US5.9 billion ($8.8 billion), capping a nightmarish year, but said it had "sufficient liquidity" to fund its turnaround plan without US government aid.

The number two US automaker's results showed a sharp widening of its losses as auto sales were slammed in the fourth quarter by a deep economic crisis and credit squeeze.

But Ford said that unlike rivals GM and Chrysler, it had enough cash to keep operating as it executes a restructuring plan.

"Based on current planning assumptions, it does not need a bridge loan from the US government, barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base, dealers or creditors,'' Ford said in a statement.

Ford's loss in the fourth quarter was more than double the deficit in the same period in 2007 of $US2.8 billion ($4.2 billion).

Revenues plunged some 33 per cent to $US29.2 billion ($43.9 billion) in the period, amid weak sales and the divesting of its Jaguar division.

For all of 2008, Ford posted a whopping loss of $US14.57 billion ($21.93 billion), compared with a $US2.7 billion ($4.06 billion) loss in all of 2007.
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Revenues for the year fell to $US146 billion ($219.7 billion) from $US172 billion ($258.8 billion).

"Ford and the entire auto industry faced an extraordinary slowdown in all major global markets in the fourth quarter that clearly had an impact on our results,'' said Ford president and chief executive Alan Mulally.

[Dave_au]

Ford burns $US5.5b, rejects aid
January 30, 2009 - 6:30AM
http://business.smh.com.au/business/...y.html?page=-1

Ford, insisting it can survive without federal loans, said it burned $US5.5 billion in cash in the fourth quarter and will tap a revolving credit line after the worst annual performance in its 105-year history.

The second-biggest US automaker also pared first-quarter North American output and won concessions from the United Auto Workers. While Ford pruned its projection for 2009 domestic industrywide sales to as few as 11.5 million vehicles, that figure is about 1 million more than other estimates.

“Their forecast is still too rosy,” John Wolkonowicz, an analyst at IHS Global Insight in Lexington, Massachusetts, said today in an interview. “They’ll need money from the government by midyear.”

Ford posted a quarterly net loss of $US5.9 billion, or $US2.46 a share. Excluding costs Ford considers one-time expenses, the loss was $US1.37 a share; the average of 11 analyst estimates compiled by Bloomberg was $US1.24.

The results dragged Ford to a full-year loss of $US14.6 billion, eclipsing 2006’s record of $US12.6 billion. Chief Executive Officer Alan Mulally reiterated Ford’s aim to avoid federal borrowing even as cash in its automotive business fell to $US13.4 billion.

Ford won’t say how much cash it needs to stay in business. General Motors, the largest US automaker, has said it needs at least $US11 billion to pay bills, while Chrysler has put its threshold at $US2 billion to $US2.5 billion. Both said they would have been out of operating funds as soon as this month without the emergency aid approved in December.

Using the Revolver

Drawing on the credit line will give Ford access to $US10.1 billion in cash by next week, and erases any chance that the money wouldn’t be available later should lending conditions tighten, Chief Financial Officer Lewis Booth said in an interview at Ford headquarters in Dearborn, Michigan.

“We are not tapping the revolver to fund operations. We are not tapping the revolver to stay above minimum cash levels,” Booth said. “We are doing it to ensure that it’s there.”

The move exhausts Ford’s available borrowing under the revolver, Booth said.

Ford fell 5 cents, or 2.5%, to $US1.98. The shares plunged 70% in the 12 months ended yesterday.

Ford’s net loss more than doubled from $US2.81 billion a year earlier. Fourth-quarter revenue plunged 34% to $US29.2 billion as the recession shrank the company’s US vehicle sales by 30%, hastening the cash drain.

‘Not Sustainable’

“These losses are not sustainable,” Sean Egan, president of bond ratings firm Egan-Jones Ratings Co. in Haverford, Pennsylvania, said in a Bloomberg Television interview. “Even if they draw down their lines and the money from the government, it begs the question of whether or not the overall situation is going to improve.”

This year’s cash consumption will be less than in 2008 as capital spending and inventories decline, Ford said. Total liquidity at the end of December was $US24 billion, Ford said.

Ford’s new estimate for the 2009 US auto market is 11.5 million to 12.5 million vehicles, down from the 12.2 million it reiterated earlier this month. Most industry forecasts call for domestic demand of about 10.5 million vehicles, the lowest since 1982, after sales tumbled 18% in 2008.

Talking With Stakeholders

Ford is in talks with “all of its stakeholders” about becoming more competitive, Mulally said on a conference call with analysts and reporters.

He declined to identify the participants after being asked whether Ford is negotiating with unsecured bondholders about debt-for-equity swaps, as GM and Chrysler are doing under the terms of their federal assistance.

“I’ll take a pass on that one,” he said.

First-quarter production was chopped again, this time by 30,000 vehicles, to a target of 400,000 units. That pushes the reduction from a year earlier to 42%. Ford said it plans to cut $US4 billion in automotive costs this year, with steps including shutting plants.

Two moves by the UAW will help bolster cash, Ford said. Matching steps it took at GM and Chrysler, the union will end the so-called jobs bank at Ford, in which employees are paid even when there is no work. Ford has about 1,500 workers in the program.

The UAW also agreed to let Ford convert money set aside for a UAW-run fund for retirees’ health care into a note payable at the end of 2009, adding $US2 billion to the company’s liquidity.

Ford has managed to forgo the federal loans doled out to GM and Chrysler because Mulally decided to borrow $US23 billion in 2006, securitizing all of Ford’s assets, including its trademark blue oval logo.

Ford’s Outlook

After annual losses this year and next, 2011 should see a break-even result or a profit before taxes and excluding special items, the company has said. Executive Chairman William Clay Ford Jr. said on Jan. 11 the automaker wouldn’t seek federal loans “unless the world implodes.”

Ford asked US lawmakers for a credit line in December of as much as $US9 billion as Congress tried to craft an industry rescue package. When that measure failed, the US Treasury granted $US17.4 billion in loans to GM and Chrysler. Ford has been in contact with the Treasury about ways to bolster finance arm Ford Motor Credit, a US government official said on Jan. 16.

Ford Credit said yesterday it will eliminate 20% of its workforce, or about 1,200 workers, as part of a cost-cutting move.

The Treasury Department also provided a $US6 billion bailout to GMAC LLC, the lender affiliated with GM, and $US1.5 billion in loans to Chrysler Financial.

Ford’s 7.45% note due in July 2031 fell 0.63 cent to 22.63 cents on the dollar, yielding 33%, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

Bloomberg

[Iggypoppin']

while its good ford think they can survive without loans....you wonder how?
they must have a trick up their sleeves.

[Bossxr8]

Originally Posted by SLWXR6

while its good ford think they can survive without loans....you wonder how?
they must have a trick up their sleeves.

They have enough in cash reserves, they have bought their employee numbers well down and they were profitable before the economic crisis for a quarter, so they were already on the right track, the crisis just put a holt to it. They also have a range of new small cars such as Fiesta which will be made in the US to come. The turn around plan is all set to go, and to work, it just needs the economy to come back from the depths. It might take a year or 2 but they are well placed for when it does eventually get better.

[Ohio XB]

Thanks for posting that long article. There is some good info in it but this line....

“These losses are not sustainable,” Sean Egan, president of bond ratings firm Egan-Jones Ratings Co. in Haverford, Pennsylvania, said in a Bloomberg Television interview.

...is something I could have wrote even with my mere high school diploma.


Something up their sleeve? Kinda.


It is most likely that gasoline will go up in price again this summer. If not for legitimate reasons (more miles driven in summer, increased demand, etc.) then because "they can". Even if gasoline goes up to $3.00 a gallon people will still say "At least it isn't $4.00 a gallon like last year." As the price climbs high again people will be trading in their larger vehicles for more fuel efficient ones. Ford is ready for this. With the economy being as bad as it is people cannot afford to pay as much in gas. Belts are tight and people are looking to conserve money where they can.

Also, Ford has equalled Toyota in quality and is working on surpassing them. They already have with some models.

Ford has the highest fuel efficient mid-sized sedan, for those that refuse to go to or cannot make do with a compact, hitting the market this spring, the Fusion Hybrid.

The Focus gets 35 mpg highway.

The Flex has among the best fuel mileage in it's class for people that want some style while transporting 7 people.

A little over a year from now the Fiesta will be hitting the market. I don't know for sure what engine it will have, but the 4 cylinder EcoBoost engine that is in the Lincoln "C" concept gets 43 mpg highway.

The European Focus should be hitting the US market about the same time. Fuel mileage should be more than the current Focus.

In all Ford is bringing 6 Euro models to the US market.



Yeah, they've got a few things up their sleeve.


Steve

[Iggypoppin']

sounds good! Hopefully this will silence the doubters. Good to know that they took steps to secure their future.

[b0son]

Originally Posted by SLWXR6

while its good ford think they can survive without loans....you wonder how?

the next generation of Fords will be powered by spin...

[b0son]

Originally Posted by Ohio XB

With the economy being as bad as it is people cannot afford to pay as much in gas. Belts are tight and people are looking to conserve money where they can.

I think you're missing something pretty fundamental....

People not only wont be able to afford the fuel, they wont be able to afford the changeover cost for a different car.

The car makers have been building more and more capacity without realising the demand was fueled by debt and was always going to fall sooner or later. Either the makers shed capacity, or one brand has to fold altogether.

[Bent8]

Originally Posted by b0son

I think you're missing something pretty fundamental....

People not only wont be able to afford the fuel, they wont be able to afford the changeover cost for a different car.

The car makers have been building more and more capacity without realising the demand was fueled by debt and was always going to fall sooner or later. Either the makers shed capacity, or one brand has to fold altogether.

Spot on mate...one thing to consider is what percentage of all the oil companies' profits come from petrol sales?...

If the bankruptcy of a carmaker means the oil companies' take a big hit also, I doubt they would allow that to happen.

I don't blame Ford at all here, they aren't even asking for a handout!

Look at the big banks going down the hole overnight and others merging just to stay afloat as the US Federal Reserve continues it's money printing spree in the hope of stopping the so-called "global economic downturn".

Just keep this in mind, everytime you hear of another bailout, know your hard-earned dollar is about to lose a few more cents in the stock market!

[Ohio XB]

Originally Posted by b0son

the next generation of Fords will be powered by spin...

Ford has reduced operating cost by $5 billion compared to 2005. I hope that accounts for something in many people's books.



Steve

[Ohio XB]

Originally Posted by b0son

I think you're missing something pretty fundamental....

People not only wont be able to afford the fuel, they wont be able to afford the changeover cost for a different car.

The car makers have been building more and more capacity without realising the demand was fueled by debt and was always going to fall sooner or later. Either the makers shed capacity, or one brand has to fold altogether.

I can't believe I am going to waste my time responding.....


If you read or watched the news at anytime in the last 3 or 4 years you will have found Ford has been reducing their capacity, especially over the last 3 years. They have reduced capacity by CLOSING 17 plants and REDUCING by 50,000 employees.


As far as being able to afford the change, a $35,000-$40,000 truck or SUV payment is more than a $16,000-$27,000 compact or mid-sized sedan payment.


I won't be wasting any more of my time responding to your posts where you merely exhibit a lack of knowledge on relative current events or the world around you. Read a newspaper or watch a news channel. Read business magazines, press releases from the manufacturers, industry media, or SOMETHING to get a sense of what you are attempting to talk about. I don't usually harp on someone like this but you have yet to make a post directed at me that exhibited any sense of presence.

...and I won't be coaxed.


Steve

[madmelon]

Originally Posted by Ohio XB

I can't believe I am going to waste my time responding.....


If you read or watched the news at anytime in the last 3 or 4 years you will have found Ford has been reducing their capacity, especially over the last 3 years. They have reduced capacity by CLOSING 17 plants and REDUCING by 50,000 employees.


As far as being able to afford the change, a $35,000-$40,000 truck or SUV payment is more than a $16,000-$27,000 compact or mid-sized sedan payment.


I won't be wasting any more of my time responding to your posts where you merely exhibit a lack of knowledge on relative current events or the world around you. Read a newspaper or watch a news channel. Read business magazines, press releases from the manufacturers, industry media, or SOMETHING to get a sense of what you are attempting to talk about. I don't usually harp on someone like this but you have yet to make a post directed at me that exhibited any sense of presence.

...and I won't be coaxed.


Steve

Belive it or not, some people/companies actually own their cars, rather than the bank/credit union/etc. What b0son said about changeover costs is exactly right if you consider those people.

...and if more people world over started saving for something instead of greedily "getting what they want now", not only would they save a bucketload of money, there would be less chance of stupid economic disasters like the current one.

[Ohio XB]

Originally Posted by madmelon

Belive it or not, some people/companies actually own their cars, rather than the bank/credit union/etc. What b0son said about changeover costs is exactly right if you consider those people.

...and if more people world over started saving for something instead of greedily "getting what they want now", not only would they save a bucketload of money, there would be less chance of stupid economic disasters like the current one.

I would be one of those people whom own my vehicles outright. I would have bought a compact car this past summer if Ford already had the Fiesta available in the US. I am waiting for next year when they will be marketed here to buy one ASAP. I drive a pick-up truck that gets 17 mpg in mixed driving. The Fiesta will get more than 40 mpg. I'll keep the truck for pulling my small fishing boat and hauling stuff but the Fiesta will be my daily driver.

My point was that people would be buying smaller vehicles that cost less, and are also much more in line with people's incomes than the truck or SUV they bought.

In 1991 I was driving a 1979 F-150 which was paid for, bought used. I bought a 1990 Ford Festiva (sub-compact, new) to replace it. The fuel savings alone made the payment on the Festiva. That truck only got 11 mpg. Gas was cheap but the truck always needed work because of age. Now I had a car that I didn't have to work on and didn't cost me anymore than I was already paying for gas for the truck. I couldn't lose. I didn't have a boat at that time so really no need for the truck.

Also, Americans (but not me) finance vehicles for up to 5 and 6 years in order to get a payment they can afford, or think they can afford. I agree with you, so many Americans make purchases beyond their means. Anyways, those people that bought around 4 years ago that do not have too much of a balance left where the trade in value of the vehicle will offset that can get into a lower payment than they have now, and need less gasoline too, saving money and saving money.

People that bought in the last year or two may not be able to recoup their balance because the resale value of their big vehicle has dropped. Some of those people may have a hard time getting into a new smaller vehicle, unless they do like some people I know, buy a $600 smaller used car and park the SUV or truck. Yeah, it happens.




Steve

[EgoFG]

this is possibly straying off topic .. but

Paying for a car on credit CAN make 100% financial sense.
My interest rate on my car loan, taken out two(ish) years ago is still lower than my home loan.
I do not have positive money, only negative money because of the homeloan. So as long as the 5year net difference in interest paid on the sum is less in a car loan than a homeloan I am in front financially. For me, saving positive money for a car could only happen after I pay a 200,000 home loan out.
The homeloan also make financial sense as the repayments are less than the cost of renting plus the 'lost' interest on the deposit.