Saturday, April 25, 2009

Ford Posts $1.4 Billion Loss

Prior posts have brought up the precarious state of the auto industry in the the U.S. and the world. Ford announced yesterday that it lost $1.4 billion dollars for the first quarter of 2009. OK, that is a huge number for any corporation!

Ford stock was up 11% percent yesterday on the news. Wall street had been expecting a larger loss based on the first quarter severe downturn of 37% in sales from 2008. So, Wall street voted with their pocketbooks and purchased the stock based on perceived positive news.

Ford CEO Alan Mulally has turned around the company since joining in the company in 2006. One of his first major moves was to obtain $23 billion bank loans in 2006. He had to mortgage every asset the company owned including the Ford blue oval.

Since Ford was able to obtain financing in 2006, they have been able to weather the financial crisis much better than GM and Chrysler. Mulally had the vision to know that if times were tough that cash is king. His financial acumen is paying huge dividends now...Ford has not needed a government bailout. Ford currently over $21 billion dollars in cash! They project that they have sufficient funds to go thru 2010 without any additional government support.

My take on this is that Mulally has done a superb job at Ford! They have not had to beg for government money...instead they can focus on getting to profitability.

There are two potential problems! First, if GM or Chrysler file for a chapter 11, that may negatively impact some of the automobile suppliers which could possibly disrupt Ford's ability to produce cars. A Chrysler bankruptcy appears eminent at this time! Second, if sales continue at this negative pace or get worse then they would require governmental assistance in 2011.
Check out the article written by Ken Bensinger of the LA times!

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