Ford Prospects Worsen

Posted by: David Kiley on June 20, 2008

07F150_tease.jpg

Prospects are worsening for Ford.

The automaker said today that 2008 results will be worse than previously forecasted, and that it will have trouble breaking even next year. It is further reducing factory shifts to reduce the supply of vehicles to dealers. And it is taking the extraordinary step of delaying its F150 pickup truck launch this Fall by two months in order to let dealers sell off as much of the old inventory, at discount prices, as possible.

Even Ford Credit, always a reliable profit generator, will incur a pre-tax loss this year, said Ford.

Delaying the F 150 pickup launch is akin to a farmer announcing he is going to plow under his crop rather than sell it at a loss. The F-Series pickup is still Ford’s biggest profit generator. It is Ford’s most important franchise. Two years ago, if an auto company was to come along and bought Ford, it is the truck business alone that would have been worth the purchase. But the economics of the pickup business is going sideways for Ford. With national gas prices hovering around $4.20 a gallon for regular unleaded, home construction cratered, job losses and home equity that would normally fund home rehab projects in the tank, demand for new pickups is in the pits.

Forecasters say that June auto sales are tracking at an annualized selling rate of 12.5 million. Compare that with the almost 19 million selling rate we saw some months after the terrorist attacks of September 11 when automakers were offering zero-percent financing, and the poor state of the U.S. auto market bcomes clear. An Ann Arbor Ford dealer has been advertising a basic, admittedly stripped down, new 2008 F-150 pickup for less than $10,000. That wasn’t seen as possible a year ago.

Ford’s problem, for now, doesn’t seem to be cash. As I wrote here only yesterday, Ford projected it would have cash burn of $12-$14b between 2007 and 2009. That figure is now $14b-$16b to cope with more headcount reduction than anticipated, as well as profit shortfalls because of a decline in higher-end SUVs. But the cash-burn is now being adjusted upward from there.

GimmeCredit’s Shelly Lombard estimates that Ford’s cash cushion is only about $7 billion to $9 billion if they continue to burn cash t the rate they are going this year and next. That’s because an automaker needs about $10 billion to keep the lights on and the water running. At the end of the first quarter, Ford reported $29 billion in cash and $12 billion credit lines. But if Ford actually had to tap those lines, she says, Wall Street and the ratings agencies would smell blood, like wolves to wounded caribou.

Reader Comments

Commie Stooge

June 22, 2008 11:05 AM

The pickup truck as luxury vehicle is evaporating as gas prices rise.
Pickups were previously only bought by Farmers; home builders; and plumbers.
Not for personal transportation.
Ford will have great difficulty selling their current stock of F150 vehicles.
Home building is going to tank as the alt-a mortgages go bad, and another 2 million homes face foreclosure in the next year or so!

malach hamovess

June 22, 2008 12:47 PM

No one to blame but themselves.

Did they think that oil prices were going to stay low forever; didn't they realize that they were building vehicles that relied on cheap gas.

They've had since 1973 - the first gas crisis from the Yom Kippur War - to move to efficient vehicles, and they've been fighting it all the way

HBG

June 22, 2008 1:22 PM

Ford, GM, and Chrysler are hemorrhaging cash. Bureaucratic glacial design practices, anachronistic UAW contracts, unwillingness to cut dealers by half, all too sadly the writing is on the wall. Challenging times require visionary and revolutionary strategies to totally reform auto manufacturers into the 21st century. Current management and the UAW are outdated dinosaurs who are simply not up to the task. In 5 to 10 years Toyota, and Honda will be the BIG 2. Ford, GM, and Chrysler will bones picked clean in bankruptcy. So Sad!

Mike NC

June 22, 2008 3:09 PM

Ford has great cars they just need to get the small cars to market now not in 2010 . the Courier pick-up from Mexico .The KA and European Focus now is the time lets kick some Toyota butt.

Mickey1995

June 22, 2008 6:45 PM

Bring that F-150 with a 2.4 L high efficiency, direct injection turbo diesel, with plug-in hybrid for short trips around town, particle filter, with lots of plastic or aluminum body panels to shave off about 800lbs, and I might be interested. Oh, and put a Chevy or Dodge badge on it while you are at it.

Nick

June 22, 2008 7:40 PM

Look at the new Ford Focus. Is Ford committing suicide?

uhuh

June 22, 2008 10:40 PM

Ford continually cuts their own troats. They keep discontinuing their best cars like the 97 cougars and t-birds and the 98 mark viii. What doesn't help is the fact that americans are not intelligent enough to buy american cars. Just because toyoda and others "assemble" cars here does not make them american. Most of the work and profits go overseas. Nobody ever "built" a toyoda in america like the commercials claim. Unskilled workers just snap their parts together.

Juan J robles

June 22, 2008 11:22 PM

I think that the goverment needs to keep the oil companies from raising their oil
prices.

richie herink

June 23, 2008 5:27 PM

For performance like this Ford recently gave Mulally a $27 million bonus. No body gets it.

William Clay Ford has been and is an absolute disaster as COB. Its time to bring in Jerry York.

Richie

kartl

June 24, 2008 1:04 AM

Looks very promising i just hope that ford would produce trucks that are much fuel saver i read some car blogs that they are planning to create a water powered cars
[url=http://innerautoparts.blogspot.com/]The Car Geek[/url]

mlhm5

June 24, 2008 11:02 AM

Ford is dead man walking. Currently they do not have enough profitable product to sell in a $5 a gallon USA.

New high mileage product won't be here until model year 2011 and then what's arriving will be a Fiesta without Ford's Ecoboost engine, without a diesel and without a hybrid.

The announced vehicles for model year 2011 make the US market way more competitive than it is today and the Fiesta will not have a chance.

Basically it is the car of today arriving 2 years late.

Snoz

July 3, 2008 7:04 AM

Did not Mark Twain once said something to the effect that the announcement of his early death was over exaggerated? Ford is not dead man walking by any imagination or exaggeration. BW Readers should not rely on public announcements of future cars from auto manufactures or even David Kiley. For auto company's strategy, it is best to keep next year's model in secret or in disguise. Whatever and whenever announcements are made to the media, they tend to be vague guidelines of future offerings or intended to solicit a public reaction. After jettsoning Aston, Jaeguer, and Landrover, Ford will use the receipts to improve its core brands: Ford and Lincoln-Mercury. The Fiesta is a stop-gap solution to the current problem caused by high fuel prices. Ford recognizes that the new paradigms(sic) of the car business has shifted from gas thirty engines to gas mizers which calls for new technology. Ford will be the first to deploy direct fuel injection technolgy across a broad range of its cars while Toyota, Honda, Nissan, and GM have not yet committed to it whole heartedly. Like a recovering patient, Ford is under physical therapy and certainly not a walking dead as some would have you believe.

Max L Hibbs

July 8, 2008 11:25 PM

Hey Snoz, do you work for Ford or just drink the Kool-Aid.

Ford NA is in deep do-do without the ability to offer high mileage passenger cars to waiting consumers, and by 2011 the competitive landscape is going to be even tougher than it is today with PHEVs, BEVs, other hybrids and diesels to choose from.

Rick

March 30, 2009 11:43 PM

Ford will and must survive. I drive Toyota and Chrysler and wish I was still with Ford and supporting the industry and if they survive I will buy Ford again in the future for sure. I hope the unions get put in line if not survival will be a problem.

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