Bailout Watch 232: CS First Boston on FoMoCo Plan: "Not Much Here"

“There is very little in the way of new initiatives/efforts/changes to improve the cost structure or profitability of the company, in our view. Most of the document submitted to the Congress is an outline of the company’s existing ‘Plan’ and actions that either have already been taken or are slated to play out over the next couple of years (especially as it relates to new product development). Ford is now calling for its existing plan to deliver profitability of at or above breakeven by 2011 at both the corporate level and in North America. On a cash flow basis, the plan is to be breakeven or above on a Corporate basis by 2011 (no mention of North American cash flow). Ford’s base case US sales assumption for 2011 is 15.5 million total vehicle sales. Following are some things that we think are lacking in the plan:

1. A more aggressive plan to significantly and quickly shrink the dealer network.

2. Any concrete, further reductions to hourly wages, benefits, work rules – and especially the JOBS bank. Ford said that it is “presently engaged in discussions with the UAW with the objective to further reduce our cost structure and eliminate the remaining labor cost gap that exists between Ford and the transplants.” The company asked the incoming Congress and the Obama Administration to “establish a process to address in a comprehensive way the conditions that inhibit competitiveness of the domestic industry”, including, “creditors, dealers, the UAW, and suppliers.”

3. Any further near term balance sheet restructuring. Because Ford has significant liquidity, the company is in a more flexible position than GM, and therefore is able to submit a plan with less draconian actions to stem the significant cash burn it is experiencing at current volume levels. Indeed, the document submitted to Congress does not seem to acknowledge the profound rate of cash burn that Ford is currently dealing with.”

[thanks to you-know-who-you-are]