Ford Burning Through $20b?
Can that be right? The last time we checked it was $16b. If Ford's tearing through $20b though to the end of '09, what do you think GM's conflagration looks like? The $1b per month stat may be an underestimate… Anyway, this terrifying tidbit re: Ford's bank balance was buried at the bottom of a Fortune article [ via CNNMoney] by Alex Taylor III. The once and future former Detroit cheerleader's speculating about whether there's a Ford Motor Company in investor Kirk Kerkorian's future– after Captain Kirk and FoMoCo CEO Big Al Mulally's sit down in Sin City. And then Taylor drops the bomb. "On their flight back home, Mulally must have wondered whether he simply dodged the first bullet. Kerkorian never remains on the sidelines after buying in and the only question about his greater involvement in Ford seems to be when he will choose to make his move. He has offered to invest more capital in the automaker, a potentially welcome move, since Ford is expected to burn through nearly $20 billion in cash by the end of 2009. But like any investor, Kerkorian would not be expected to hand over his money without some strings attached." Ya think? On the other hand, maybe Kirk's just waiting for a Chrysler/GM C11 dead cat bounce before cashing-in his chips.
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Ford's real challenge, honestly, is if South America and Europe head south. Right now, those are the profit engines. However, Ford is still sitting on $29 billion in cash through Q1. The expected cash burn for the rest of this year and all of 2009 is around $13-14 billion right now (after $6 billion in burn in Q1, mostly related to VEBA allocation), higher than the $10 or so planned at this point, but understandable given Ford's issues. If the EU and SA start to sink, Ford's cash burn will, of course, increase. However, they probably have $19 billion they CAN burn through plus a credit line, which hopefully they won't touch... plus whatever they get out of Tata in one-time payments or supply revenues. And then whatever Captain Kirk is willing to float (probably through a bond offer, as opposed to share issuances). I'm just still not worried about Ford's cash burn. I think we're a year away from needing to worry - although statements during the Q2 conference call could prove me wrong.
Ford's selling both the Fiesta and the new Focus right across the border in Mexico today. Seems like it wouldn't take any of those billions to simply start offering them in the U.S. right now when there is real strong demand for good high efficiency cars.
We don't need no water...
Well... I tried to warn you that Ford was not doing as well as some of you think. But Ford's problem is not the crappy market or their cash burn or that they are up to their eyeballs in debt. The biggest problem is the way Ford is structured. I'm surprised it has not been covered in the deathwatch series yet. I wish I had the time (and the talent) to write about it.