Ford Expected to Show Fifth Consecutive Quarterly Loss

Update as of 1 PM ET to this article at end

By Brendan Moore

07.23.2009

ford-corporate-logo-smallFord Motor Co. is expected to show another loss when it reports its quarterly figures today. The forecast loss would be the fifth quarterly loss in a row, but it is expected that Ford will also report a lower cash burn.

If Ford’s burn rate has lessened, and the company still sees a recovery in the near future, the news should cheer analysts enough to send the stock price up.

“I suspect they are going to have very good news for the quarter, and I could see in the short term the stock going up more than it has. Long term, I still think they have significant issues that investors need to be aware of. They are still burning cash and they still have a lot of debt on their balance sheet”, Morningstar analyst David Whiston said.

Ford shares closed at $6.47 at the close of business Wednesday. The share price has gone up over 600% since November of 2008 when it was at $1.02, and, it was announced that Chrysler and GM were lobbying for federal aid.

Ford is carrying a massive debt load of $25.8 billion USD as of the end of March, which is primarily the debt Ford incurred when it mortgaged all of it’s assets before the crunch, as well as some of the operating debt occurred during the ongoing economic crisis. It’s a lot of money, but in what looks like an incredibly shrewd move in retrospect, Ford’s war chest gained through borrowing against their assets early is what kept them out of bankruptcy, the fate that befell their Detroit rivals.

In the first quarter of 2009, Ford lost $3.7 billion and ended March with cash reserves of $21.3 billion.

The bad news is that by going through bankruptcy, Chrysler and GM emerged from same with a much smaller debt load than Ford, their domestic competitor. It can’t help but be a plus in the next few years when profit news is reported every quarter.

Ford CEO Alan Mulally stated that Ford’s debt reduction, corporate streamlining, and sales efforts were all on track to pull the company out of debt and back to profitability.

Ford has actually gained market share in the US as the market has fallen 33% in the first six months of 2009. In what has to be good news for a newly-competitive Ford, some of that new market share apparently came at Toyota’s expense, not just from their two weakened Detroit foes.

UPDATE 07.23.2009 1 PM ET: In a surprise to most , Ford this morning reported a net income of $2.3 billion, or 69 cents a share, compared with a loss of $8.67 billion, or $3.89 a share, for the same period a year earlier. The return to profitability was as a result of a one-time $3.4 billion gain from restructuring.

Ford’s cash burn is down to $1 billion for the second quarter, reduced from the aforementioned $3.7 billion in the first quarter of 2009.

Ford’s share price was at $7.08 at mid-day.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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7 Comments

  1. Won’t it be HILARIOUS when Ford stomps GM and Chrysler, driving them into the grave once and for all, and then goes after those robots at Toyota?

  2. Great results, but I think it’s way too early to bet on anyone, including Ford. There will be more twists and turns before everything is said and done.

  3. I think Ford and Hyundai are just what Toyota and Honda need to knock them out of their complacency. Clearly Toyota misfired big time with the new Tundra.

    The Tundra is kind of between an F-150 and an F-250 but that is its problem, its too big for the weekend warriors and too small for commercial users and its just not built TOUGH.

    The new Honda Insight appears to be a major bomb in the making if the review from Consumer Reports is anything to go by.

    Adversity makes new opportunity for nimble companies. And in the next few years we will find out just who was the most nimble

  4. Ford made a lot of bad cars in the early to mid eighties, but since the late 90’s they have been consistently top tier in terms of quality.

    Unfortunately it takes a long time to overcome past perceptions.

    They still need to do several things though:

    1. Bring out the F-100, the Ranger is just too small for the market. They need to make it just big enough to have a forward facing rear seat, not the silly jump seats.

    2. Bring over the Australian Ford Falcon to replace the Crown Vic. (and then sell me a convertible version). I’d tradein in my Mustang in a heartbeat for a 4-door RWD drop top.

    3) I still think there is a market to bring back the Ford Ranchero. (on the Falcon platform) Lot’s of folks need the ability to haul “stuff” without the need for a frame on bodypickup. Assuming comonality of most drivetrain and suspension components witht the Mustang, production cost would be reasonable.

  5. Mark, I agree with you.

    Mark in AZ, I don’t agree with you about the Falcon even though I love the Falcon. But I agree with you about the F-100.

    I think Ford has the brightest future of the U.S. car companies and I’m looking forward to their next offerings.

  6. Trey,

    Ford desparately needs a D-class RWD platform to replace the crown vic for Law Enforcement sales. Otherwise they will continue to lose market share to Crysler products. The Falcon is the only full size RWD viehicle Ford has available. (or am I missing one?)

  7. If you want to buy stock buy in the first manufacturer to build a sub $7000 car for sale in the US.

    It may well be a joint venture between a couple of US manufacturers to spread development manu. and marketing costs.

    For those who mock Tata’s Nano offering, consider that a Tata subsidiary fabricates the Titanium alloy subfloor frame for the Boeing 787 Dreamliner in India.

    What major component do either Ford, GM or Chrysler supply for the most advanced commercial airliner?

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