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Ford seen posting big loss, cash burn for Q4


DETROIT January 29, 2009; David Bailey writing for Reuters reported that Ford Motor Co is expected to post a big fourth-quarter loss on Thursday, but investors likely will be looking a lot closer at the automaker's cash burn rate and prospects for 2009.

The crucial question for investors and creditors is whether Ford, which has said it does not need U.S. government loans, will be forced to change its plans in the face of a still-contracting global auto market.

The U.S. auto market, the world's largest, fell to 26-year lows in December and are expected to have fallen further at the start of this year, ratcheting up the pressure on an already reeling industry.

Ford has sought a $9 billion line of credit to use as insurance against a worsening in the global economy.

Ford has taken pains to set itself apart from struggling rivals General Motors Corp and Chrysler, which have been pledged $17.4 billion of government loans and have said they need additional funds to turn around their operations.

Indeed, the U.S. economy has continued to weaken in the new year and the first month of 2009 has not looked much different in terms of sales than the last three months of 2008. U.S. light vehicle sales ran at a 10.3 million rate in December.

Standard & Poor's said in late 2008 that Ford had a few more quarters of comfort than its rivals, but would still face significant danger of falling below cash levels needed to maintain its automotive business.

Analysts on average expect Ford to post a fourth-quarter loss of $1.22 per share before one-time items, according to Reuters Estimates. That would translate to a loss of more than $2.8 billion.

Deutsche Bank said on Wednesday it expected Ford's results to come in below the per-share consensus with significant pretax losses in North America, Europe, Ford's Volvo brand and Ford Motor Credit.

"But investors will likely focus on the operating cash burn," Deutsche Bank said, adding that working capital results could be much below the negative $3.4 billion Deutsche Bank expects due to production cuts in North America and Europe.

"The magnitude of the deterioration in results in Europe will be a focus given the severe production declines observed in the fourth quarter relative to flat production through the third quarter," Deutsche Bank said.

Ford burned through $7.7 billion of cash in the third quarter, a rate higher than GM's for that quarter. Ford has said its cash burn rate for the fourth quarter was lower than that, but still significant.

Ford reported $18.9 billion of automotive cash at the end of the third quarter and had access to $10.7 billion of untapped revolving credit.

The automaker also hopes to receive $5 billion of direct loans from the Department of Energy's program to support improvements in fuel economy. That funding, if it comes to pass, would be spread over a number of years.

Ford is expected to update its 2009 U.S. auto industry sales forecast and may update its own production plan for the first quarter and its progress on restructuring.

The automaker had set a broad range for its U.S. industry sales in Congressional testimony late last year, when it also estimated returning to profitability in 2011. That range is expected to be narrowed this week.

In November, Ford said it planned to improve automotive cash by $14 billion to $17 billion through 2010 through a number of cost cuts, including reducing expenses for salaried workers by 10 percent by the end of January in North America.

The automaker also has sold off assets to raise cash.

Ford sold a 20 percent stake in Mazda Motor Corp in November and has been shopping Volvo, the last of its former premier auto group of European brands that included Aston Martin, Jaguar and Land Rover.

Ford and the United Auto Workers appear to agree that the automaker would also benefit from concessions granted to GM or Chrysler as those companies cut labor costs to meet the conditions of their government bailout loans.

Ford unveiled an electric car plan at the Detroit auto show, one that will require the U.S. government to adopt a more expansive energy policy that would support the entire auto industry's conversion toward electric or hybrid vehicles.

Editing for reuters by Richard Chang