Bailout Watch 419: Ford Losing Luxury of Time

Robert Farago
by Robert Farago
bailout watch 419 ford losing luxury of time

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.

Join the conversation
2 of 16 comments
  • Robert.Walter Robert.Walter on Feb 25, 2009

    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."

  • on Feb 25, 2009
    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.

  • Tassos What was the last time we had any good news from Ford? (or GM for that matter?)The last one was probably when Alan Mulally was CEO. Were you even born back then?Fields was a total disaster, then they go hire this clown from Toyota's PR department, the current Ford CEO, Fart-ley or something.He claims to be an auto enthusiast too (unlike Mary Barra who is even worse, but of course always forgiven, as she is the proud owner of a set of female genitals.
  • Tassos I know some would want to own a collectible Mustang. (sure as hell not me. This crappy 'secretary's car' (that was exactly its intended buying demo) was as sophisticated (transl. : CRUDE) as the FLintstone's mobile. Solid Real Axle? Are you effing kidding me?There is a huge number of these around, so they are neither expensive nor valuable.WHen it came out, it was $2,000 or so new. A colleague bought a recent one with the stupid Ecoboost which also promised good fuel economy. He drives a hard bargain and spends time shopping and I remember he paid $37k ( the fool only bought domestic crap, but luckily he is good with his hands and can fix lots of stuff on them).He told me that the alleged fuel economy is obtained only if you drive it like a VERY old lady. WHich defeats the purpose, of course, you might as well buy a used Toyota Yaris (not even a Corolla).
  • MRF 95 T-Bird Back when the Corolla consisted of a wide range of body styles. This wagon, both four door and two door sedans, a shooting brake like three door hatch as well as a sports coupe hatchback. All of which were on the popular cars on the road where I resided.
  • Wjtinfwb Jeez... I've got 3 Ford's and have been a defender due to my overall good experiences but this is getting hard to defend. Thinking the product durability testing that used to take months to rack up 100k miles or more is being replaced with computer simulations that just aren't causing these real-world issues to pop up. More time at the proving ground please...
  • Wjtinfwb Looks like Mazda put more effort into sprucing up a moribund product than Chevy did with the soon to be euthanized '24 Camaro.