Ford Loses $14.6 Billion in 2008; $5.9 Billion in Fourth Quarter
January 29, 2009
By Michelle Krebs
DEARBORN, Mich. -- Reporting its biggest loses in its 105-year history, Ford Motor Co. said Thursday morning it lost $14.6 billion for the full year of 2008. In the fourth quarter alone, Ford lost $5.9 billion.
"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," Ford CEO Alan Mulally said in a statement.
Ford's 2008 losses are deeper than its 2007 losses. In 2007, Ford lost $11.8 billion for the year and $3.1 billion in the fourth quarter.
Ford reiterated that doesn't need to borrow money from the U.S. government as General Motors and Chrysler have.
Based on current planning assumptions, Ford said in its earnings statement Thursday, it does not need a bridge loan from the U.S. government, "barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base, dealers or creditors."
However, analysts aren't convinced that Ford won't need that government bridge loan. Some analysts say Ford's planning assumptions, especially for U.S. car sales, are too rosy, even though Ford recently downgraded its forecast slightly.
And Thursday's earnings report which showed Ford rapidly burning through cash gave analysts further evidence that the automaker will need government help. Ford's total liquidity stood at $24 billion at year end. However, cash in Ford's automotive business dropped to $13.4 billion on December 31, 2008 from $18.9 billion on September 30, 2008, indicating Ford burned $5.5 billion in cash in the fourth quarter alone. The automaker did say it will tap into its own revolving credit line. "We think Ford needs the money," said Rebecca Lindland, analyst for the forecasting firm IHS Global Insight. "We don't think the economy supports the sales level Ford is forecasting."
Ford's planning assumptions for U.S. car sales are at the high end of the forecasting spectrum in the 11 million to 12 million range. Most forecasts are in the 10 million to 11 million ballpark.
"Ford's assuming a significant recovery starting in the second half. We don't see that," said George Magliano, also an analyst for IHS Global Insight. "That's a big difference in terms of needing more cash or not."
The end of the first quarter, expected to be the worst period of the year with the lowest U.S. auto production in any quarter for 27 years, will better indicate if Ford needs the money, say IHS Global Insight analysts.
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