Ford Bankruptcy Looming???

Discussion in 'Wall St. News' started by ByLoSellHi, Jul 13, 2009.

  1. Ford Cash Crunch Coming

    By Robert Farago
    July 13, 2009


    I’ve taken a lot of heat in these parts for predicting that Ford’s bankruptcy bound. Having watched GM and Chrysler’s long march to Chapter 11, the signs seem pretty obvious to me: lousy branding, excess nameplates, non-competitive models, a pegged BS meter and a proven inability to take in more money than they spend. Yes, there are differences; his name is Alan Mulally. But, as The Detroit Free Press finally reports, The Blue Oval Boyz are burning down the house. Or, to put it more politely, “Even if Ford Motor Co. reaches all of its targets by 2011, the Dearborn automaker’s growing debt load could end up weighing the company down.” As far as euphemisms go, that one just went.

    Today, Ford has $25.8 billion in automotive debt — much of which was accumulated to raise cash so the company could survive the economic downturn that it correctly forecast several years ago . . .

    What’s more, Ford’s debt level could reach $36 billion by 2011, when Ford expects to be profitable again, Citibank analyst Itay Michaeli said in an interview with the Free Press. That is about four times more than Ford’s expected earnings. Healthy automotive companies usually carry about twice as much debt as earnings, he said.

    Ah revisionism. Ford decided to mortgage itself up to and including its logo without any foreknowledge of the economic downturn. They did it to survive their sinking fortunes in a “normal” (which is to say vastly inflated) U.S. new car market. In fact, the company’s analyst was publicly predicting a bull market even as the bubble popped. And then forecast recovery approximately ten minutes after the market tanked.

    Still is, actually. Pipas reckons the drought ends at the end of 2010, doncha know. FoMoCo better hope so.

    With that high level of debt to earnings, Ford’s debt could strain the company’s finances as payments on it become due. One of those payments is $10.1 billion, due in the fourth quarter of 2011 . . .

    “We gave guidance that our cash burn was $3.7 billion in the first quarter, which was substantially less than the fourth quarter, and we gave guidance that every quarter this year, it will get lower and lower and lower,” Mulally said. “That gives everybody confidence that we are on a positive track.”

    Ford might well be on a positive track—cutting costs, suckling-up to the federal teat ($5.9 billion loan from the DOE for retooling thank you very much) and ratcheting-up a, wait for it, .6 percent NA market share gain. But the U.S. new car market is dead in the water. With Nissan’s Carlos Ghosn (and TTAC) predicting an extended downturn, well, it’s only a matter of time before Ford runs out of dough.
  2. Finance Or Reorganize Daily? :cool:
  3. Touché.

  4. Found
    On the

    The new mustang is one sharp car tho.
  5. GM SUDDENLY out of bankruptcy - is this really a new, future-proof company ?

    Banking system SUDDENLY profitable again - or is it just taxpayer money injected via the AIG needle ?

    Crisis in EU officially declared "over" by German Ministry - SUDDENLY - or is it propaganda because elections are ahead ?

    Let's get it straight - the credito-econo-bubble is being reinflated successfully once more, but it will come down really hard. I give it 5 yrs max.

    And the small people will take all the suffering - no exceptions made
  6. Ford bonds are trading around 90 cents on the dollar.

    Two month's prior to GM's BK, GM bonds were around 18 cents.

    If Ford IS LUCKY, their debt will only be 36 billion in two years.

    Tell me how the hell they'll become profitable again? Ever? So long as they have to honor those legacy cost obligations? In this industry? With the Chinese about to undercut the South Koreans on price?

    Ford bondholders are going to get barbecued. Only an insane person wouldn't book a sale now, while the getting is good.
  7. ddefina


    Doesn't Ford still have "cancer?" In the form of Union labor I mean. I think this guarantees their future bankruptcy, along with GM later down the road.
  8. .....and a shorter walk to Chapter-12......:cool:
  9. Yep.

    They extracted some concessions, but are still plagued by many legacy costs.

    The only way they'll shed them is through BK, as Chrysler and GM found out.

    Their cash burn rate is a grave illness and likely to remain so given weak auto sales market (now and for the long stretch), especially since they did not take taxpayer money, but floated a ton of debt when Mullaly came on board.
  10. Just read an article on TTAC about the new Taurus (which looks like crap).

    It starts at 27k, and most typically equipped dealer stocked ones will run 35k.

    Good luck, Ford. You'll need it in spades.
    #10     Jul 13, 2009