By on October 26, 2009

(courtesy senioremporium.com)

Will Ford go bankrupt? I doubt it. Not while the “bad” automakers that suckled on the federal teat go on and on and on and on. A FoMoCo C11 would expose the government’s Detroit bailout for what it was/is: unfair, ineffective, ill-conceived and unsustainable. Politically, Ford’s failure is not an option. If push comes to shove, Uncle Sam will send Ford more Department of Energy loans, some juicy subsidies and generous tax breaks; anything and everything up to and including cash money. This despite—I mean because of the fact that Ford is guilty of the same sin that sank GM and Chrysler: taking in less money than they spent. Political calculations aside, is it even possible that Dearborn’s darlings will be forced—forced I tell you—to prostrate themselves in front of federal taskmasters? Once again, to answer that question, feel the burn.

Twenty-four billion dollars is not a lot of money. Not in the car biz. When GM was heading towards bankruptcy, stockholder activist and momentary GM Board member Jerry York warned that General Motors needed a $10 billion “pad” for cash flow. You know; to keep the non-proverbial lights on. Subtract that amount from Ford’s current $24 billion cash pile, and that leaves “just” $14 billion.

By all accounts, ex-Boeing exec and current FoMoCo CEO Alan Mulally has done as much as humanly possible to dowse Ford’s cash burn. Incentives are down. Market share is up. Factories have been trimmed. The workforce downsized. Even so, during the first half of this year, Mulally’s minions spent $4.7 billion. Double that and you’re looking at a $9.4 billion annual burn rate. That would leave Ford with $4.6 billion. Or, another half year at the current, vastly reduced rate; in 2008, FoMoCo said goodbye to $21.3 billion.

While you’re running all those numbers, lauding Ford’s $25 million CEO (first year) and wondering if Ford can avoid paying the piper through investor confidence (i.e. Other People’s Money) or much-promised profits, don’t forget that the American automaker doesn’t enjoy the advantages of bankruptcy. Unlike their cross-town rivals, Ford’s buried under a $35 billion debt mountain. Worse, the money’s due in 2013. At the end of its pre-nationalization life, GM was paying a billion bucks a month in interest. Without—and perhaps with—a fresh cash infusion, Ford can’t afford that kind of vig.

Need I say more? How about this: Mulally predicted a turnaround in the U.S. new car market at the end of this year, despite obvious indeed incontrovertible evidence that the U.S. economy was no rising tide. [Note to armchair analysts: rising unemployment and a moribund housing market are not good for new car sales.] And now Big Al’s predicting that self-same sales lift for the beginning of next year.

Well he would say that, wouldn’t he? What else can he say? Lower costs and rising market share be damned. Ford simply cannot sustain itself in a U.S. car market that hovers around nine million sales per year. In other words, there’s a big ass clash between Ford’s positive spin and the grinding reality of an ongoing recession. And who should be shining their light on this irony but the United Auto Workers (UAW) . . .

Ford wants investors to think that all’s well with The Glass House Gang. At the same time, it wants the UAW to sign a contract that lowers its costs and outlaws strikes (no less). As The Free Press puts it, the story that Ford is returning to profitability is “complicating efforts to convince Ford’s 41,000 UAW-represented workers to vote in favor of a modified labor contract.”

Complicated is just a word. Despite the fact that UAW President Ron Gettelfinger is “selling” Ford’s looming debt to secure the workers’ approval, and rearranging the voting order to save the most recalcitrant U.S. plant (Dearborn) for last, the union rank and file aren’t buying it. Ford’s Kansas City plant rejected the new contract and others (two out of the five that have voted). If the contract gets shot down, Ford’s “good news” media story will start to unravel.

The press will blame the UAW (which is only half right). The union will do what it always does: go back, knock some  heads together, pretend that it’s made substantial changes, claim victory, re-do the vote and get the result it desires. And . . . we’re back! Again. Still. Soon.

Never mind. And at the end of the proverbial English day, Ford’s survival all comes down to product. The Blue Oval Boyz have a number of promising vehicles on the horizon: the new Fiesta and, uh, a few other things.  And therein lies the tale. Ford’s branding is still in shambles; its identity as not-GM/not-Chrysler will only take it so far. The products may (or may) not be class-competitive, but the Blue Oval’s a bunch of branding gypsies, moving from message to message to message, never settling on a single coherent message (from the Department of Redundancy Department).

In fact, a Chrysler and GM C7 is about the best possible thing that can happen to Ford. But Motown’s tramps will not face their reckoning before Congressional midterms, or, perhaps, ever. (The whimper vs. bang thing.) No matter how you look at it, by the time GM or Chrysler leave the field of battle, Ford’s debt will be due. In other words, the real dead cat bounce will come too late.

And so, with the best intentions and will in the world, get ready to bail out Ford. They simply can’t compete with America’s nationalized automaker and its Italian twin-under-the-skin in a down market. Not because their rivals are so good. Ford’s problem: GM and Chrysler have been propped-up with your tax money, keeping Dearborn’s darlings from enjoying the fruits of their foresight. The Motown bailout queens are oxygen thieves. Make no mistake: Ford is still gasping for breath.

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63 Comments on “Ford Death Watch 49: Gypsies, Tramps and Thieves...”


  • avatar
    Bunter1

    The law of unintended consequences strikes again.

    Hat tip to the Gov’t as usual.

    Bunter

  • avatar
    rnc

    Mulally’s minions spent $4.7 billion. Double that and you’re looking at a $9.4 billion annual burn rate.

    Why did you leave out Q3 where they went through $0.1 Billion? Changes the burn rate to what? Not convenient for your purposes?

  • avatar
    Dimwit

    Well, you’re consistant. Even though your track record speaks for itself, I think that in Ford’s instance you’re too pessimistic.

    Ford is in a bear chase in the N.A. market. They don’t have to “win”, they just have to be ahead of GM and Chryco. Given their positions, their resources — or lack thereof — and the overwhelming “bailout dividend” that keeps showing up on the monthly sales figures, the latter two are very weak. Enough so, that Ford will survive. Might even prosper.

    There is nothing that says that they can’t go back to the capital markets again, nor repackage some more of their debt. They’re not out of time, resources or ingenuity. They just need a little spark. Perhaps the pickups?

    Why yes, the glass IS half full, why do you ask?

  • avatar
    BDB

    Yeah, what about Q3?

  • avatar
    johnthacker

    Why did you leave out Q3 where they went through $0.1 Billion? Changes the burn rate to what? Not convenient for your purposes?

    That would fall under the “government shoveling money to them.” Unless you’re silly enough to believe that C4C wasn’t a financial windfall for them.

    Let’s just see that the Q4 burn rate looks like without that bit of government money greasing things, shall we?

  • avatar
    ohsnapback

    Simple arithmetic spells out Ford’s problems.

    In a capital intense industry, they have huge costs, are still losing money, and couldn’t even get to profitability during the Cash for Clunkers program’s peak time of benefit.

    Now that car and truck sales have crashed again, who honestly thinks the math is working in Ford’s favor with time?

    Face the facts.

    (The slowest cash burn I’ve ever seen for Ford in the past year was 300mm per month, and that was during CFC).

  • avatar
    carguy

    While Ford would have benefited from a GM and/or Chrysler C7, it’s the down economy that is really causing headaches for Ford. With unemployment near 10%, the housing market in reverse and consumer confidence low, it’s a tough time to be a debt ridden car maker. While Ford may have had more vision than GM and Chrysler and put together a loan and turn-around plan in advance of the crash, it may still be to late for them if the economy doesn’t improve.

    GM and Chrysler C7 or not – jobs and housing will have to improve before profitability returns to the car industry.

  • avatar
    dwford

    Fiesta and, uh, a few other things:

    2011 Focus et al
    2011 Edge/MKX
    2011 Explorer
    2011 Super Duty
    2012 Escape
    2012 EV
    2012 small Mercury or Lincoln
    2012 C-Max
    2013 Fusion/Milan/MKZ
    2014 Mustang
    2014 Taurus

    The next 4 years are mapped out and funded. They have new chassis, new powertrains and new tech all coming. By the time Fiat gets anything new to the market for Chrysler, Ford will have redesigned almost everything in their lineup, and GM will still be trying to figure out what to rebadge next.

    • 0 avatar
      view2share

      Will the small Lincoln be RWD?  Will it have EPS assisted steering?
      Ford improved the Mustang for 2010, then added EPS for 2011 – boo!
      The rest is OK, in the sense of it being mostly like any other car, except the Flex
      being sort of a truck looks stationwagon thing.  Whatever.  Ford needs more RWD,
      and please go back to hydralic steering assist, and get rid of big butt cars, with too tall doors.  Yea, I know they all do it — so then so many other all-the-same to choose from, now get the picture?

  • avatar
    Steven02

    I think you need some more info. You are expecting Ford to keep the same cash burn rate. Most people are expecting the cash burn to be slower, in fact much slower. Q1 was expected to have the highest burn rate for the year.

    In fact, as posted, the burn rate is much much slower now.

  • avatar
    geeber

    GM was burning cash to keep the lights on; Ford is burning cash to keep the lights on and make sure that its new product plans stay on track. That is a big difference, although I agree that the company is far from out of the woods at this point.

  • avatar
    Telegraph Road

    It looks like RF is sticking with his August 18 assessment: “If you take away $10 billion—the amount of float needed to keep the lights on—Crazy Henry’s mob has eight months to stop the arterial spray of red ink before contemplating C11 (or a “proper” bailout).” I’ll check back in 6 months to see who’s crazy.

  • avatar
    Christopher

    I have to agree in spirit with this Editorial. Anyone currently doing business with Ford knows that they’ve cut to the absolute bone and continue to run their business with suppliers in a extremely cutthroat manner. They’ve outsourced their IT services to other parts of the globe and run local support on a reduced staff. Everyone thinks that people working with or at Ford are better off due to this positive media message they’ve fostered, but the truth is, it’s pretty rough. At least at GM they’ve got money coming in from somewhere (tax payers??) and the ability to spend it. Ford won’t spend money at all. They’re fighting for their lives and it’s tough.

  • avatar
    gslippy

    The Fiesta isn’t as much of a Hail Mary pass as the Chevy Volt, but it still qualifies as such. I hope it helps Ford like they believe it will.

  • avatar
    basho

    “They’re fighting for their lives and it’s tough.”

    You say this like Ford’s the only company in this situation. I don’t know percentages, but I bet it’s safe to say that more than a comfortable number of companies (of all sizes) are on that same edge. Many have already fallen over it.

    Ford is not the only car company (or company period) that is on the ropes and hoping the economy turns around next year. Most business sectors are down and how many companies can operate profitably with years of substantially lower revenues? If 2010 isn’t better than 2009, Ford’s survival will be the least of anyone’s worries.

  • avatar
    basho

    “The Fiesta isn’t as much of a Hail Mary pass as the Chevy Volt, but it still qualifies as such. I hope it helps Ford like they believe it will.”

    I think the overall success of the Fiesta will depend completely on fuel prices. If prices remain low, than it might not help much at all. If prices soar, then Fiesta could become a sales leader among the Ford brands.

  • avatar
    Christopher

    basho — within the context of this discussion, which is Ford vs. GM, Chrysler and the rest of the autommotive industry — it is applicable to say that Ford is fighting harder than anyone else to stay afloat. They’re at a big disadvantage to the imports and they don’t have any outside line of funding.

  • avatar
    basho

    Christopher, do you mean “are they (Ford) fighting harder to stay around” or “they (Ford)have a harder fight to stay around”. The difference being “effort” vs “situation”.

    I think there is no doubt Ford is fighting harder to stay around (efforts made) than GM or Chrysler. It seems to me they are fighting as hard to stay around as any of the imports (yes, they are fighting to stay around also). Ford is front and center in everyone’s mind. It’s books open and everything on the table to be discussed on forums like this one. I haven’t researched every competitors books to see what dangers they have ahead of them. Since the entire industry is down by a very significant margin, I would think that everyone is hurting in some way.

    Any company that needs money right now is either finding that 1) money is hard to come by regardless of financial strength or 2) money is exceedingly expensive to borrow compared to borrowing in the last decade. Either way many companies are in the same boat as Ford with regards to securing capital.

    I agree that Ford has a lot of debt to service in the future. That was Ford’s ‘All-in’ gamble to stay alive. I for one hope it pays off.

  • avatar
    mtymsi

    Whatever Ford’s future is to be the Fiesta isn’t going to play much of a role one way or the other, not enough profit per vehicle to make a significant difference. If the annualized sales rate doesn’t increase significantly near term Ford will be far from the only company in trouble. The whole industry simply can’t continue at the current sales pace, way too much overcapacity and not nearly enough profit. No one could have anticipated how bad business would get therefore no one based their business model on the current sales rate (if that was even possible).

    What Ford does have in its’ favor vs. GM and Chrysler is a pipeline full of new products and the fact they haven’t been supported by Feds to anywhere near the same extent meaning if they need the money it’s still available to them.

    For those two reasons I think Ford’s longterm viability is immensely better than GM or Chrysler neither of which I think will survive.

  • avatar
    Tstag

    People forget far too quickly the huge debt mountain that Ford carries. Ford is hoping that everything goes it’s way not just for the next 12 months but for at least the next decade.

    Their debt mountain is immense. Ford’s short, mid and long term futures all hang by a thread.

  • avatar
    SherbornSean

    There’s a very simple way to save Ford and GM:
    Liquidate Chrysler.

    Keep Jeep. Give the minivan franchise away, but dump the rest; it only subtracts value.

  • avatar
    Bruce from DC

    Well, I’m not quite so gloomy. While its true that GM and Chrysler have the benefit of running on the public’s money, they have other, more serious problems (which are a big part of the reason why they are where they are) that others have mentioned here. For once, however, it is good for Ford to be #2 . . . that is, following in the footsteps of GM and Chrysler. The reason is that Ford’s creditors, having seen what happened to GM and Chrysler’s secured creditors in those companies’ respective bankruptcies understand what will happen to them if they don’t work with Ford to restructure this debt on less onerous terms when it comes due.

    And, I really don’t expect to see Chrysler around for much time at all. Even more than GM, I think Chrysler is totally bereft of any goodwill with the U.S. public . . . given that most folks are going to figure out very quickly that it’s a subsidiary of Fiat, a foreign manufacturer that left the U.S. market with its tail between its legs. I would not be optimistic about the public’s willingness to buy Chrysler-badged Fiats. And, thanks to its two prior owners, there apparently is nothing in the Chrysler product pipeline to look forward to.

    It’s pretty clear from the Rattner article in Fortune that only Fiat’s willingness to step in saved Chrysler from being cast aside by the government. If Fiat figures out quickly that Chrysler is just going to be a money pit for it — as it may — then I would expect Fiat to let Chrysler be liquidated . . . and the government isn’t going to step in a second time.

  • avatar
    KingShango

    Everyone seems to be forgetting that Ford already has a $9 billion loan from Uncle Sam all lined up, they just need to ask for it if they need it. Personally I think Ford will be fine, as noted above they have greatly reduced their cash burn and that will only get better. They are still benefiting from not taking government loans and their forthcoming line-up is focused (pun intended) on small cars from Europe. And the development of those cars has already been paid for.

  • avatar
    Mr Carpenter

    I thought I read here at TTAC that even Toyota was unable to make any money in North America. The most profitable car company in history, yada yada… can’t turn a dime.

    Kind of gives one pause for thought about the chances (or lack thereof) of survival for Ford.

    I agree, Chrysler is a write-off. GM, too, eventually.

    Say, whatever happened to the investigation of cooked books at GM? I suppose that all got brushed under the rug and lumped with “Liquidation Motors” (old GM)

  • avatar
    Telegraph Road

    Ford’s market capitalization is $24B. At that level, they can tap the equity markets if needed. But cash burn has slowed considerably since Q1. In Q2 they burned only $1B. No one outside the Glass House knows what they’re burning in 2009Q3, but we’ll all know next week after Q3 earnings are released. However, extrapolating from 2009H1 cash burn rate is truly sophomoric, when it’s known that the rate is declining.

  • avatar
    mtypex

    If the cash burn rate is declining, they can tap equity markets, and they have billions in terms of a government-backed credit line … they’re fine. What’s the rush, unless the future product is as nasty as the Lincoln MKT?

  • avatar
    Tstag

    Let’s hope American’s buy Small cars. Ford and Chrysler will be banking on it!

    • 0 avatar
      view2share

      Mazda3 ?  ;)   Fiat is coming, Fiat is coming… with 1 car :o
      Is it just me, but the really tiny cars, like the Mazda2 have little safety space between those sitting in the rear seat and the real possiblity of wear someone’s SUV or truck around your neck.  Simply too small — too scary for me.  If I bought one, NO back passengers except driving in town below 25 MPH.

  • avatar
    Telegraph Road

    RF claims “If push comes to shove, Uncle Sam will send Ford more Department of Energy loans, some juicy subsidies and generous tax breaks; anything and everything up to and including cash money.”

    Nonsense. Consider Ford Credit’s industrial bank application. It’s languishing forever in Washington. Meanwhile, I can’t drive to work in the morning without hearing an Ally Bank (aka GMAC) ad on the radio. However, as a taxpayer, perhaps I should be glad that Uncle Sam is giving Ford the shaft.

  • avatar
    jamie1

    Yet more unmitigated dirge from the self-professed King of Doom. Don’t let facts stand in the way of a good story.

    Can’t believe this rubbish continues to be trotted out.

    This is not the Truth About Cars – these are rantings of someone who actively desires to see the automotive industry fail so as to somehow justify an earlier held position.

    Sorry, but it won’t happen. Ford is healthy and getting healthier. Quality is at an all time high, Ford has more safety top picks than anyone else. It’s entire product line-up is being or will be revitalized in the next 2 years and this is already paid for and done.

    Ford has debt – but they are reducing it already and will continue to do so. UAW deal or not is academic – Ford has a plan for success that does not depend on this deal anyway.

    The share price is rocketing, market share is up 11 months out of 12, net pricing has increased and contributed $1.9 Billion this year alone. The future is very healthy so rather than continue with this ridiculous Death Watch, you should spend your money on buying some Ford shares – better to invest your money in Ford rather than investing your time rubbishing their efforts.

  • avatar
    ohsnapback

    Now, a word from the plain ole’ math:

    Ford’s total liabilities: $210,933,000,000.00

    This is as of 30-Jun-09.

    And that’s the crux of the problem.

    Of that total liability, $133,066,000,000.00 is long term debt and another $69,769,000,000.00 is accounts payable.

    Yep, Ford owes 70 billion to its vendors/suppliers, etc.

    The difference between Ford and Toyota is that Toyota isn’t structured like an inverted pyramid, with two or three retirees to support for each active worker. That legacy debt doesn’t exist at Toyota or Honda.

    Like I said earlier, the math works against Ford. They’d have to have extremely profitable cars and trucks for a very long period of time to even make a dent in their debt loads, and so far, they’ve yet to even turn a profit, period.

    On top of that, they’ll have to do this in an environment of rapidly escalating competition.

    Only a BK of some sort would allow Ford to shed a good chunk of this debt that hangs around their neck like such an albatross.

    Therein lies the rub.

    • 0 avatar
      view2share

      Perhaps they will consider something like a nice looking Fairlane 500 RWD again.  Looks to me like retro, RWD, American style, is all popular, yet we seem to get more of the same, as in Japanese looking cars, or knock-offs of some style cue from Germany.

  • avatar
    ComfortablyNumb

    Easy, people. RF is just giving us his opinion. After providing us with the truth for so long, he’s earned the right to put out a few baseless, factually-unsupported rants.

  • avatar
    Ken Elias

    I strongly disagree with Mr. Farago on Ford. Debt for Ford is only a problem when this company as constructed today is losing marketshare and/or volume. The marketshare problem is resolved and now on the upswing. Volume will return with the economy. Ford’s operating leverage will make it hugely profitable sooner rather than later – and the debt concerns will become a non-event, especially considering that the interest coverage will be more than substantial, credit ratings will improve, and the cost of a refi decreases.

    The UAW VEBA will take care of retiree health care obligations starting Jan 1. Problem solved.

    There is no crisis at Ford. Cash generation will soon be more than ample, and most importantly, no executive wants to be subject to pay limitations mandated by the gov’t. That’s a huge incentive to keep the ship upright.

    And for anyone doing the math, the debt of the finance company isn’t the same as it’s back against receivables – not future auto production/sales.

  • avatar
    Telegraph Road

    The Street.com on Oct 15 “By now the story of the Ford turnaround has nearly reached business school classic status.”

    But deniers persist. Here especially.

  • avatar
    Pch101

    Assuming that Ford can figure out how to increase transaction prices, the company is in a win-win situation.

    If the economy recovers, the debt will be extended, refinanced, etc..

    If the economy sucks, the debt will be renegotiated.

    If the economy really sucks, the government will intervene and the debt will be crammed down.

    This is a no-lose situation for the company. None of the scenarios result in liquidation (although a reorganization bankruptcy is part of the latter scenario.)

    Andrew Carnegie used to say something along the lines that a man who owed a thousand dollars had a problem, but a man who owed a million dollars had a banker with a problem. Update those figures to 2009, and you can see that Mr. Mulally learned something from Mr. Carnegie.

    Ford is fortunate to not share the legacy mentality of GM of viewing market share as next to godliness, even while it led to tremendous losses. Ford is trying to increase transaction prices, which is exactly what it should be doing. However, the high incentives make it clear that it isn’t really achieving that goal. If there is a story that the Ford bulls are missing, it’s that the American consumer is far from convinced that they need leave their Toyotas and Hondas behind, despite the hype.

  • avatar
    ohsnapback

    So Pch101:

    By your logic, Ford would do fine by taking out even more debt, right?

    Your analysis concluding that Ford having debt of over 200 billion puts Ford in anything other than a terrible position is absolutely incredible (incredible as in incredulous).

  • avatar
    Pch101

    Your analysis concluding that Ford having debt of over 200 billion puts Ford in anything other than a terrible position is absolutely incredible (incredible as in incredulous).

    I’ve read your comments about economics, and based upon that, I assume that you don’t follow the big picture of how things actually work.

    Earlier this year, Ford renegotiated some of its debt at 47 cents on the dollar. Just because a company owes a dollar doesn’t mean that it will end up paying a dollar.

    The company is obviously highly levered. But it made more sense to lever up the company than it would have been to sell its income producing assets, as did GM. Destroying future cash flows is a graver threat than borrowing money that won’t necessarily be repaid.

    Ford does not need to eliminate all debt to make the company work. Ford’s debt load is about $18 billion above that of Toyota. If Ford could trim another $30-40 billion from the load, it would be in decent shape. But they ultimately need to figure out how to sell cars, and to take sales away from the likes of Toyota.

  • avatar
    GS650G

    No good deed goes unpunished. In this case Ford leadership took steps to borrow money themselves while they still could and revamped their product line as much as they dared while the other two waited for the economy to magically turn around.

    GM has been propped up way too much, so much in fact they really haven’t taken the serious steps needed to be a profitable automaker. Sure, ditching Pontiac, Saturn, Saab and Hummer are seen as serious moves but these were dead brands anyway. The real problem is the truck and SUV product line that they hang onto. That and serious missteps in the market with hybrids and the Volt debacle.

    Ford deserves to make it, and if tax money has to go anywhere again then it should go to Ford. Because they tried hard, but in the face of nationalized competition they will run out of steam eventually. When the stock price starts back down again we will know the market has spoken and it’s over. For now, they live.

  • avatar
    mtymsi

    Another point I just thought of in comparison to GM and Chrysler is Ford’s strength in overseas markets. Aren’t they currently profitable in Europe and some other foreign markets like Latin America?

    I’m not quite sure what the point is in bashing them given the dire circumstances GM and Chrysler are in unless you think there shouldn’t be any American automobile manufacturers. That certainly wouldn’t benefit anybody that is a US citizen. Editorializing under the guise of a Ford death watch really doesn’t serve any legitimate purpose unless you’re hoping for Ford’s demise in which case my question would be why?

  • avatar

    GS650G

    Ford borrowed the money because the Ford family knew that C11 would mean the end of their control. Bailout schmailout; the feds would never allow the firm to stay in charge.

    Our tax money should NOT go to propping-up ANY automaker. I understand all the reasons why people disagree with this position, but I don’t accept them.

    An automaker’s stock price is not the best indicator of its health. I remember when GM’s stock hit $40 a share. I was deluged with comments laughing at my predictions of a GM C11.

    Again, I’m not saying Ford will go belly-up. They’re too American to fail. I AM saying that they’re carrying a lot of baggage in a race to the death, where two huge zombies are locked and loaded and its other competitors are smart and fast and well-financed.

    The biggest problem: Ford doesn’t have a coherent brand strategy or product mojo. Look at the MKT. Any company that could misfire so completely is inherently suspect.

    This is no fluke. The Edge is . . . anyone remember the Edge? The Flex is, at best, a base hit. The Fiesta might be the best small car ever, but what are the odds it’ll be better/more attractive/more popular than the new Civic? Better than the Cruze, sure. But so what?

    Ford builds class-leading trucks. It makes money on trucks. Trucks aren’t selling. The clock is ticking.

  • avatar
    mtymsi

    At some point trucks have to start selling again they just won’t sell in the same numbers they used to as those that bought trucks without needing them are for the most part permanently out of the truck market.

    Without question Ford has a long way to go after ceding the car market to the Asians but I would have to disagree that they don’t have a coherent strategy. If the Fiesta, new Focus and Fusion aren’t a coherent car strategy what is?

    The Fiesta and new Focus are already market leaders in Europe why wouldn’t they have a more than reasonable shot at success in the US?

    No manufacturer in a short time span is going to dethrone Honda or Toyota but having excellent new products in the showroom is step in the right direction. I don’t think anyone at Ford aimed at the Cruze as the vehicle they needed to compete with. I do think Honda and Toyota were the targets.

  • avatar
    lahru

    Put your money where your mouth is.

    Gm stock-unavailable
    Chrysler stock-roulette wheels
    Ford stock-available and rising

    money talks and s&^t walks.

  • avatar
    Z71_Silvy

    [i]Ford stock-available and rising[/i]

    Ford’s stock in August was around 8.50. Today, it is over a dollar lower. That’s over a 10% drop in two months.

  • avatar
    GS650G

    RF,

    GM was in deep trouble with GMAC. If they could have borrowed the money when the bottom fell out they would have. The stock price bump to 40 occurred when VEBA was announced. The market thought a solution had been found for their legacy costs. It was not.

    Cry-sler did borrow a lot apparently and those investors took one for the team earlier this year. And there is nothing wrong with The Ford Family acting in their own best interests by keeping the company in their name. They did hire Alan so they’re not total idiots. Investors might get shanked in a few years when the bills come due but for now they are not being asked by Obama to surrender their interests for 30 cents on the dollar.

    I agree tax money should not go to companies. I’m with you on that. But the horse is out of the barn and predictions of trouble for Ford as a result of the bailout are starting to come true. bailout them all or none at all, because the others now enjoy a huge advantage. With 70% of GM owned by Washington DC, Ford has a huge problem. Fiat/Chrysler is less of a threat because everyone knows that’s a marriage made in hell.

    Ford YTD sales were off 5% this summer, Honda and Toyota took a huge dive. I think they can make it unless GM and Fiat/Dodge are allowed to run for years on bailout money and advantages. It’s the faint heartbeat we see in sales that gives them hope.

    I think they are going in the right direction, although the MKT is indeed horrible. Their trucks are best sellers for a lot of reasons, and the buyers are not going to go into Civics when they need work trucks instead. The failure of Nissan and Honda to crack the truck market along with Toyota’s weak showing proves American trucks still have it where it counts.

    Personally I would buy a Ford today because I think they have come far enough in quality and value, although resale is still poor. I’m not a car flipper who buys new every three years so resale isn’t as important to me. The powertrains are mature and so far so good. Reviews have been generally positive and with a few exceptions (MKT) the cars look pretty good.

  • avatar
    ComfortablyNumb

    OK, that was a bit much…

  • avatar
    Vega

    It’s unbelievable how much hate RF still attracts by simply stating facts. Especially considering we what happened on this website before and during the GM collapse.

    In my opinion the Ford apologists on this site are currently stuck somewhere between denial (crash ratings! Fiesta! Q3 cash flow!) and anger (just read gregaryous’ comment). It won’t help. Just ask the GM fanboys for advice on how to best cope with the three remaining stages of grief…

  • avatar
    obbop

    I regularly receive the impression that the typical commenter hereabouts is far removed from the steadily growing number of working-poor within the once-sovereign USA led by once-semi-honorable elites.

    Ten-percent unemployment? Perhaps.

    Ten-percent under-employment leaving folks barely scraping by? Perhaps.

    Any possibility of another ten-percent with at least some decline in discretionary income preventing a new vehicle purchase? Could be.

    How about another ten-percent getting closer to retirement and fearful so are saving every penny possible and, even if needing a vehicle, will go for used? Very possible.

    Select any possibility and add another ten-percent not buying new…. fudge factoring is recommended in this scenario, I believe.

    So, who then, is left to buy new vehicles?

    What are their demographics?

    Groups that trend towards buying “foreign” or “domestic”? (lines blurrier than ever).

    I am one shanty-dwelling entity that has little faith in the USA’s future, folks.

    When I hear the old-timers down at the American Legion hall, a bastion of blue-collarness at every one i have visited, mumble aloud the word “revolution” when 25 years ago and more that word could have easily led to a fist-fight outside, my doubts about the future are increased… added to the many other indicators I see and hear on the po’ side of town.

    Perhaps rather than wondering if vehicle manufacturer X Y or A will survive a more apt conjecture would be if the USA society, government or other aspects of the whole that combined create the over-all USA entity will even survive.

    I believe there IS a possibility of future calamity that would make the entire collapse of the “Big 3” a mute point.

    The politicos and the mass media are failing to convey reality to the masses.

    And the trends that make me gloomier and doomier than typical appear to be increasing.

    I recommend that in the long-term that those of thee with ample funds to devise an escape plan now. If not for you perhaps for your kids or grand-kids.

    I could be wrong, of course but, if my prognostications are correct a micro-gram of prevention is worth the proverbial long-ton of cure.

    For optimal safety flee outside the USA.

    Hunkering down in a rural area with ample supplies is okay but still risky.

    Plenty of survival advice on the Web with some sources far superior to others.

    Look askance at Web sites offering advice while offering goodies for sale.

    Do not discount the growing anger and desperation of the commoners.

    I believe the embers are glowing. Who knows what and how much of a spark could ignite the bonfire of all-out civil turmoil?

  • avatar
    FleetofWheel

    If Ford’s position really gets dire, it might be a good thing.
    They could throw up their hands and go to the nuclear option.
    Create a new holding company based in the southern US in non-union states, then transfer all assets to the the new corp.
    Sure, there’d be a morass of legal payouts for prior agreements but like a bad divorce, some day it would be final and they would be free.

  • avatar
    bomberpete

    Z71_Silvy :
    October 26th, 2009 at 10:31 pm

    [i]Ford stock-available and rising[/i]

    Ford’s stock in August was around 8.50. Today, it is over a dollar lower. That’s over a 10% drop in two months.

    Z71 Silvy:

    Did you consider the fact that Ford’s stock was up because of Cash for Clunkers? Right now it’s valued correctly, given their debt and the realities of a 9 million auto sales rate and 10-plus percent unemployment. I’d say it’s a “hold” right now.

    Oh, and obbop, when did the warden give Internet privileges to the Unabomber? You might want to consider posting to thesurvivalistforum.com instead of TTAC.

  • avatar
    wmba

    Obbop: Interesting viewpoint — remember when you were living out of your vehicle some years ago. Compared to the usual zanies stocking up on dehydrated food and cans of baked beans, I find your thoughts quite calm and collected. And germane.

    I’m not happy that my taxes are propping up GM and Chrysler at twice the per capita cost compared to the US. RF says that he understands the other side’s reasons for keeping up those two companies, but does not accept them.

    Despite not being happy with having my taxes go to keeping GM and Chryco alive, I do accept the need to keep them going for at least a while.

    The alternative to propping up the banks and the automakers has become increasingly clear over the last couple of months. It avoided total world financial collapse, at least for now. There have been any number of programs on the likes of CNBC and PBS documenting what happened.

    I am afraid that jumping off the cliff to maintain principle is a practice followed mostly by lemmings.

    What is more concerning is the grumblings of the common folk, who are beset by unemployment or poor jobs, and no prospect of things getting much better in the foreseeable future. Then they hear that the really greedy people “slaving” away at financial institutions are still coining obscene amounts of lucre. And that such executives require top money to be attracted to the job, which is why they get paid so much. Not an argument that resonates in the heartland of either the US or Canada.

    I have no time at all for financial manipulators — they produce nothing of intrinsic value as the manufacturing sector does. Pity then that they have the influence to drag down all of society with their greed. But such does appear to be the case, and was the reason why they were bailed out last year.

    In normal business times, the car companies could have been left to molder on the remnants of their non-existent business plans, and just gone purely bankrupt. Last year was not normal, so two of them were bailed out for now.

    The remaining company, Ford, at least saw some of the bad times coming, and took steps to deal with the situation. Sure, they’re in a financial bind, but may make it out eventually. Yet they are held to hostage by recalcitrant unions acting like the aforementioned executives, in it just for themselves, criticized for still having a cash burn and generally excoriated for reasons that I cannot really accept, although I understand the basis for them in a perfect principled world.

    Which, unfortunately, this is not.

    It’s probably fair to say that huge disparities in income and opportunity can destabilize a society. And as the rich get relatively richer, the grassroots rumblings will get louder. Nothing seems to make people more annoyed than perceived unfairness.

    Good luck to Ford.

  • avatar
    BDB

    If you look at history, the whole “ZOMG TEH USA IS COLLAPSING [The USSR/Japan/China will take over] AND WE WILL BE THIRD WORLD RUN FOR TEH HILLZ NOW!!1!!1!” predictions happen about once every 10-15 years. The same stuff was said in the late 70s and early 90s, and shortly thereafter we had boom years that made those predictions look utterly ridiculous. I have no doubt this time will be the same

  • avatar
    autonut

    I think that the main reason Ford did not attached itself to federal tit because 5% of shares control 40% of the vote. As a result of “bankruptcy” at GM and ChryCo shareholders and bondholders got screwed. Unions and management got rewarded with ownership of a company. If that to happen to Ford, Ford Foundation and family may get slided. They will fight that to chapter 7.

  • avatar
    TZ

    Z71_Silvy :
    October 26th, 2009 at 10:31 pm

    [i]Ford stock-available and rising[/i]

    Ford’s stock in August was around 8.50. Today, it is over a dollar lower. That’s over a 10% drop in two months.

    Try looking at bit further back instead of picking a recent peak for comparison. In March, it was under $2 a share.

  • avatar
    ohsnapback

    October 27th, 2009 at 11:01 am

    If you look at history, the whole “ZOMG TEH USA IS COLLAPSING [The USSR/Japan/China will take over] AND WE WILL BE THIRD WORLD RUN FOR TEH HILLZ NOW!!1!!1!” predictions happen about once every 10-15 years. The same stuff was said in the late 70s and early 90s, and shortly thereafter we had boom years that made those predictions look utterly ridiculous. I have no doubt this time will be the same

    Sure, as the economy sheds millions of high-wage jobs for good, and asset bubbles collapse.

    Had I not been in kindergarten in ’80-’81, I would have retained hope, because inflation was the problem, and not PERMANENT job loss.

    You can cure inflation with monetary policy and other levers.

    Show me the way forward for the U.S. in this dramatically altered global economy, where a huge % of the 7 million jobs lost since 2002 won’t be replaced, and the unemployed and unemployable continue to rise.

  • avatar
    BDB

    would have retained hope, because inflation was the problem, and not PERMANENT job loss.

    People were talking about “permanent job loss” in 1991, and how the 1990s were going to be a decade of skyrocketing crime and hopelessness, and that no new industry would save the day. Go back and read the NYT articles in their archives from that era (it is free).

    Take the long view of things, and chill out.

    The media, and the public, are overly optimistic during booms (your house values will rise FOREVAH!) and overly pessimistic during recessions.

  • avatar
    wsn

    Mr Carpenter :
    October 26th, 2009 at 7:17 pm

    I thought I read here at TTAC that even Toyota was unable to make any money in North America. The most profitable car company in history, yada yada… can’t turn a dime.

    Could it be that Toyota wasn’t managed well?

    Honda is still making decent money. And 2/3 of Honda sales happen in the US.

  • avatar
    chops

    I dunno, I’m with Rick Waqoner on this one…can we fire Gettlefinger now?

  • avatar
    Matt51

    US blue collar wages, in real terms, have been declining continuously since 1973. Many white collar wages are following the same trajectory now. Even with six and seven year loans, many people cannot qualify for the loans. The constant hammering of peoples wages has caught up with the consumer. For Ford to survive, they would have to learn to compete with Hyundai/Kia, the industry low cost producers. Ford is not able to do that.

  • avatar
    manny

    Now if they could only come up with a GT-40 for the masses, say $40-$45,000, use Mustang running gear, sheet metal/fiberglass body, etc. I would line up and buy one, along with many that would consider the Vette, Porsche Cayman, etc. But again, its only a wish, too bad.

  • avatar
    dolorean23

    Earlier this year, Ford renegotiated some of its debt at 47 cents on the dollar. Just because a company owes a dollar doesn’t mean that it will end up paying a dollar.

    The company is obviously highly levered. But it made more sense to lever up the company than it would have been to sell its income producing assets, as did GM. Destroying future cash flows is a graver threat than borrowing money that won’t necessarily be repaid.

    re: Pch101, as usual, +10.

  • avatar
    ZoomZoom

    Oh wow, a Ford Deathwatch article. I feel a bit nostalgic now. But I’m not rooting for Ford. Competent personnel have already been laid off.

    I wash my hands of them!

    By the way, their hybrid is made in Mexico; not that there’s anything wrong with that. Mine was made in Japan…

  • avatar
    joeaverage

    By borrowing a bunch of money to keep Ford alive in the short term – does that give big key players a chance to sell their shares and rescue their wealth? Just curious?

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