I just read an article that appeared in the New York Times on Saturday, 4/25/09, about the latest quarterly financial results posted by Ford Motor Co.
Ford lost $1.4 billion and new car sales fell by 43% in the 1st quarter of 2009 and it burned through $3.7 billion of its cash. Even though Ford lost money, investors took the latest quarterly report as a good sign since Ford now appears unlikely to need government financial assistance. Unlike GM and Chrysler which are under close government supervision and may file for bankruptcy in a few weeks, Ford has started to distance itself through better financial management.
I must admit I was very skeptical when, 2 years ago right after he joined Ford as their new CEO, Allan Mulally leveraged all the factory assets of Ford. Through this action Ford obtained the cash that may help them survive through at least 2010 according to Patrick Archambault of Goldman Sachs. This has so far saved Ford from approaching the government for a bailout.
The rate at which Ford is burning through its cash is now less than half what it was a year ago. Ford management is counting on its new products to help pull it through the current situation.
Even though Ford may avoid bankruptcy, a possible chapter 11 filing at GM or Chrysler will have a hugh ripple effect on the automotive supply base. Ford relies on many of the same suppliers as GM and Chrysler. If these suppliers are forced into bankruptcy them they could hurt production at Ford if they fail to ship parts. Ford management is working with their supply base to track the situation and source parts to alternate suppliers if this becomes necessary. The government has already offered to step in and fund suppliers in order to keep them running. One concern I have is that even though $5 billion in aid funds have been promised this may not be enough to keep all the suppliers running until sales stabilize.
Another issue that threatens Ford is that GM and Chrysler will have to shutdown dealerships as they eliminate brands and downsize. As dealers close they will hold "fire" sales in order to clear inventory prior to liquidation. These sales will depress prices and will hurt Ford's sales. Some analysts are concerned that Ford may not have enough cash to withstand this slump in new car sales.
Despite these issues I remain bullish on Ford and expect them to weather this storm and emerge as a leaner company with some great fuel efficient vehicles.
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