Ford Says "No Bailout Funds" Despite Worst Loss Ever

By Don Miller
Associate Editor
Money Morning

Ford Motor Co. (F) insists it can survive through 2009 without federal loans despite a $5.9 billion fourth quarter loss and burning through over 40% of its cash on hand. 

But some analysts questioned whether the company can stay off the government dole and stay in business after the worst annual performance in its 105-year history.

The company said yesterday (Thursday) it burned $5.5 billion in cash in the fourth quarter and plans to exercise a $10.1 billion secured credit line. Chief Financial Officer Lewis Booth said the company is tapping the credit line only to make sure it's available and not to fund its operations.

The company has managed to forgo the federal loans doled out to General Motors Corp. (GM) and Chrysler LLC because Chief Executive Officer Alan Mulally decided to borrow $23 billion in 2006, securitizing all of Ford's assets, including its trademark blue oval logo, Bloomberg News reported.

Company spokesman Mark Truby said Ford's position on seeking federal loans is unchanged.  It asked for a $9 billion line of credit from the government but said it has enough cash to make it through 2009 and doesn't intend to use government loans unless economic conditions worsen.

"We don't plan to or foresee using it," Truby told MSNBC.

But some analysts said Ford will need the money eventually and is simply trying to slip under the public radar.

"They'll need money from the government by mid-year. But when they do put their hand out, it won't captivate the media nearly as much, and it will go by with less fanfare," said John Wolkonowicz an analyst at IHS Global Insight in Lexington, Massachusetts.

Ford's cash burn in the past two quarters totaled $13.2 billion. Ford's burn rate slowed to $5.5 billion for the fourth quarter from $7.7 billion in the third quarter. The company said this year's cash drain will be less than in 2008 as capital spending and inventories shrink.

"We are confident that our burn rate will be substantially slower in 2009," Booth said.

Ford won't specify the minimum amount of cash it needs to stay in business. But some analysts question how long the government's largesse will continue.

"They should go to the U.S. government very quickly and get it while they still can," Sean Egan, president of bond ratings firm Egan-Jones Ratings Co., said in a Bloomberg Television interview. "They are going to need the cash, perhaps not immediately, but certainly within the next two quarters."

Ford also announced that its credit arm would cut 20% of its work force, or 1,200 jobs, and that it has reached agreement with the United Auto Workers union to end the "jobs bank" from which laid-off workers get most of their pay. The date of that is still being negotiated.

Booth said Ford still is on track to break even in 2011, but the company anticipates worldwide sales to fall more than 10% in 2009. Ford sees improvement later this year, however, as government stimulus packages take effect.

The company said it lost $2.46 per share in the fourth quarter, compared with a loss of $2.8 billion, or $1.13 per share, for the year-ago period. Revenue in the three months ended Dec. 31 fell to $29.2 billion, down 36% from $45.5 billion in the fourth quarter of 2007.

For the full-year, Ford reported a net loss of $14.6 billion, compared with a loss of $2.7 billion in 2007. The results missed Wall Street expectations.

"These losses are not sustainable," Egan said. "Even if they draw down their lines and the money from the government, it begs the question of whether or not the overall situation is going to improve."

Vehicle sales in the U.S. are at their lowest levels in 26 years as consumers face tight credit markets and economic uncertainty. Ford's U.S. sales plunged 20.5 percent in 2008, and its market share fell slightly to 15% from 15.4% in 2007.

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