Ford Posts $3b Q3 Aftertax Operating Loss , Burns $7.7b in Cash; Cuts Jobs and Ads

Robert Farago
by Robert Farago

Smaller loss, bigger burn. Relative to last year, The Blue Oval Boyz narrowed their Q3 losses from $380m to $129m. But the cash burn is, as expected, intense. The Detroit Free Press tells the tale. “The automaker’s cash reserves dropped from $26.6 billion at the end of the second quarter to $18.9 billion at the end of September. That means Ford burned through $7.7 billion in cash in three months, or $2.6 billion a month — a much faster burn rate than over the prior 6 months, when Ford burned through about $1 billion a month.” But wait! There’s less! “Ford recorded a positive accounting charge of $2 billion for retiree health care costs during the quarter that helped the company’s overall result. Excluding special items, Ford posted a pre-tax loss of $2.7 billion for the quarter, which is worse than the $2.1 billion in losses that Wall Street analysts had been forecasting.” So… “As part of Ford’s latest plan to preserve cash, Ford said it would also cut its 24,100 remaining salaried workers by another 10%, further reduce capital spending in a variety of areas, such as advertising. Ford also said it would continue to explore selling non-core assets, in addition to other actions.” Meanwhile, if my math is right (which it seldom is), assuming Ford needs a $10b pad to keep the lights on and nothing much changes ($675m per month cash burn), they’ll conflagrate their cash in just over a year. [Raw numbers here.]

Robert Farago
Robert Farago

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  • Runfromcheney Runfromcheney on Nov 07, 2008

    Ah well. Ford will bank big when they get the dead cat bounce from GM and Chrysler going down. One reason why I predicted Ford surviving is that part of their survival is feeding off the failure of their cross town rivals.

  • Changsta Changsta on Nov 08, 2008

    I am really hoping that Ford pulls through! They're the only domestic manufacturer that has had credible competitors to the foreign competition... albeit not consistently. Hopefully the new products will get here before the cash is all gone. As a side note, I decided to pop by the local Ford Lincoln dealer the other day and was pleasantly surprised by the quality interior in the Ford Flex and the Lincoln MKX. Very well finished, very comfortable... VERY surprising!

  • Dkulmacz Dkulmacz on Nov 08, 2008

    The $7+ Bil in cash burn includes quite a bit of non-recurring outflows . . . shouldn't use that figure in any calculations since it should not continue at near that rate. No cuts, delays, deferments, cancellations or otherwise bad news for new product investment, which is great news. Ford Credit is doing great. Not 'counting on' any government money. Not in any way abandoning car product and FE just because gas prices have dipped. The top management -- Mulally, Kuzak, Farley, and Booth at least -- are top-notch . . . they have a good plan and are staying focused on delivering it. They acknowledge the sins of the past and vow not to repeat them. Layoffs suck if you're one of the 10%, but those who remain are also lean and focused . . . contrary to opinions expressed here, the deadwood has left the building and the people who remain are loyal, determined, and talented. If you truly are pulling for a successful US auto industry and want to see the US companies survive as vital makers of quality vehicles -- as you have stated repeatedly on the site -- then it's time you quit the excessive negativity with respect to Ford. I've been here for nearly 20 years and I'll tell you . . . this change is real. We *will* make it through this shit economy, and we *will* come out the other side with top tier products across the spectrum. *That* is the Truth. Oh . . . and I believe 'non-core' assets refers to Volvo and the 33% stake in Mazda.

  • HPE HPE on Nov 08, 2008

    Thanks for the explanation MgoBLUE, that makes sense.

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