Ford Lost $14.6 Billion in 2008
Friday, January 30, 2009
Ford insisted that it would persevere without a government bailout yesterday even as it reported a $14.6 billion loss in 2008, the automaker's worst annual performance in its history.
But that pledge didn't come without concessions and cuts. Yesterday Ford told lenders that it intends to draw $10.1 billion from an existing line of credit to shore up its balance sheet. The company announced that it would eliminate 1,200 jobs at its finance arm, or about 20 percent of that workforce. The United Auto Workers also agreed to end its jobs bank program, which paid workers at idle plants.
"Ford has sufficient liquidity to make it through this global downturn and to maintain our product plans without the need for government bridge loans," Ford chief executive Alan R. Mulally said in a conference call announcing the results. "We would however require a government bridge loan if there is a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base dealers or creditors."
Some analysts are already questioning Ford's projection that it can break even in 2011. That target is based on the company's assumption that the industry will sell 11.5 million to 12.5 million vehicles in the United States this year. GM, however, has offered a more pessimistic estimate of 10.5 million.
Tracy Handler, an auto analyst with IHS Global Insight whose 2009 sales analysis matches GM's estimate, said Ford's "outlook is very rosy."
"They're okay for right now," she said. But if volumes drop 1 million below the company's assumption, like many predict, Ford will "definitely have to ask the U.S. government for money."
Shares of the automaker fell about 4 percent to close at $1.95.
Ford's dismal finances capped off a terrible year for the entire auto industry. Volatile gas prices, frozen credit markets and the housing crisis all hammered the industry's sales, pushing them to the lowest levels in two decades. Even Toyota announced that it would lose money for the first time.
Ford posted a $5.9 billion loss in the last three months of the year, despite selling more than half its stake in Mazda for $530 million. Ford burned through $5.5 billion of its available cash, leaving $13.4 billion on hand as of Dec. 31. Ford took $2 billion set to go into a union-run health-care trust fund and turned it into a note payable at the end of the year, bringing its total liquidity to $24 billion.
The company is going through cash slower than it did during the third quarter. But at its current rate, Ford could be left with $10 billion, the minimum amount needed to run the company, in about eight months.
Ford's executives stressed that it is tapping its $10.1 billion credit line to simply have the cash available, not to fund operations.
"We took this action because of our concerns about the growing instability of the capital markets with the uncertain state of the global economy," Mulally said.