Ford is Blowing Through Cash Like There is No Tomorrow

The Ford Motor Company has some great products on the horizon that can make a huge difference in the auto industry. The question is, "Will they last long enough to get them to market?" In the fourth quarter alone, they burned up $5.5 billion. They have not been profitable for years and they are nearing the end of their cash reserves. How can they possibly survive without government aid? I have no idea, how about you?

From Automotive News:

Ford Motor Co., the only U.S. automaker operating without federal loans, burned through $5.5 billion in cash during the final three months of 2008 as losses mounted.

Ford finished the year with cash reserves of $13.4 billion. The company said it is drawing down $10.1 billion in available credit lines immediately because of concerns about unstable capital markets and the uncertain economy.

Ford reported a net loss of $5.9 billion for the fourth quarter, compared with a loss of $2.8 billion a year earlier, capping its third straight year without a profit. The pretax operating loss, excluding special items, was $3.7 billion, compared with a loss of $620 million during the same period in 2007.

"Ford and the entire auto industry faced an extraordinary slowdown in all major global markets in the fourth quarter that clearly had an impact on our results," CEO Alan Mulally said in a statement.

Some analysts say Ford needs at least $10 billion on hand to run its operations. At the fourth-quarter cash burn rate of $1.83 billion a month and not considering other steps, Ford was on a pace to cross that threshold by the end of February.

CFO Lewis Booth said today that won't be the case, because the company's expects to deplete its cash reserves more slowly this year.

"We look at our burn rate every day, Booth said. "We are confident that our burn rate will substantially slow in 2009, including in the first quarter."

Adequate liquidity

Ford said it has adequate liquidity and is taking steps to bolster it, including the conversion of a temporary asset account with the UAW. Discounting any cash used during January, the company's cash reserves now stand at about $26 billion.

"We are not drawing the revolver to fund operations; we are not drawing the revolver to stay above mininimum cash levels," Booth said. "We're drawing it because we think it's the prudent thing to do given the uncertainty of the financial markets."

Ford's revenue plunged 36 percent to $29.2 billion during the fourth quarter as U.S. auto sales dropped to quarter-century lows amid the longest recession since the early 1980s.

In December, Ford told Congress it doesn't plan to post a profit or break even on its worldwide or North American auto business until 2011.

Ford burned less cash in the fourth quarter than it did in the July-September period, when it went through $7.7 billion. Ford finished the third quarter with $18.9 billion in gross cash.

Ford had $10.7 billion in available credit lines at the end of the third quarter. That number was reduced to $10.6 billion when one credit line expired and wasn't renewed. The remaining $500 million in available credit is already pledged, but not drawn.

In December, Ford asked Congress for a $9 billion credit line, but said it would only need to use it if the economy worsens.

The $10.1 billion Ford is drawing today should arrive in company accounts by Tuesday.

Annual loss

Ford's full-year net loss was $14.6 billion, compared with $2.7 billion in 2007. The annual operating loss widened to $6.2 billion from $1.1 billion.

For all of 2008, revenue fell to $139.3 billion from $173.8 billion.

With losses mounting, Ford is accelerating restructuring actions. The company announced today it would trim 20 percent -- or 1,200 jobs -- from the U.S. operations of its Ford Motor Credit unit.

Ford Credit reported a net loss of $1.5 billion in 2008, following a profit of $775 million in 2007.

Ford's automotive operations lost $3.3 billion before taxes during the fourth quarter. The North American unit lost $1.9 billion before taxes. In Europe, Ford posted a pretax automotive loss of $330 million.

U.S. rival General Motors has received $9.4 billion in loans so far, part of a $13.4 billion package granted by President George W. Bush. Chrysler LLC has received $4 billion and says it needs at least $3 billion more