Ford Expected to Show Fifth Consecutive Quarterly Loss
Update as of 1 PM ET to this article at end
By Brendan Moore
Ford 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 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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