Ford Posts $8.7 Billion Loss On Writedown, Falling Truck Sales

[interestrateripoff]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

July 24 (Bloomberg) -- Ford Motor Co., the world's third- largest automaker, posted a second-quarter loss of $8.7 billion and said it will convert three truck factories to produce small cars as rising gasoline prices sap U.S. truck sales.

The net loss of $3.88 a share compared with a profit of $750 million, or 31 cents, a year earlier, Ford said in a statement distributed today at its Dearborn, Michigan, headquarters. The figure included $8 billion in pretax writedowns of North American plants and assets of Ford Motor Credit Co.

The results mark the sixth loss in eight quarters under Chief Executive Officer Alan Mulally, recruited from Boeing Co. to restore growth at the automaker. Gasoline on its way to $4 a gallon and plunging sales of F-Series pickups forced Mulally in May to abandon his target of returning to profit in 2009.

``This is going to be an extremely painful year,'' Mirko Mikelic, a senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, said in an interview before earnings were released. ``The F-150 is really where they've made money for years, and that's gone.''

Ford said it would convert truck plants in Michigan, Kentucky and Mexico into making cars. The Mexican plant conversion was announced previously.

If ford has made a loss 6 times out of the past 8 quarters how can it still be remaining in business??? They must have either very clever accountants or very bad ones.

I'm sure all the past losses have been in the billions.

Will Americans like driving around in small cars??? Will they be able to fit in them?

[Minos]

I expect their share price to double today with news like that.

[abharrisson]

I've often wondered how these us carmakers manage to stay in business... they all seem to make a loss and they all have so many debts it'd make a medium sized country blush....we may well yet see one of these go down in a massive corporate failure I suspect

[Patfig]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

If ford has made a loss 6 times out of the past 8 quarters how can it still be remaining in business??? They must have either very clever accountants or very bad ones.

I'm sure all the past losses have been in the billions.

Will Americans like driving around in small cars??? Will they be able to fit in them?

Mr Incredible managed to fit into a very small car!

[Sheer Heart Attack]

It's amazing how GM stays afloat, considering that's bleeding cash from every orifice too.

GM's market capitalisation is $15 billion and it has debt of some $300 billion.

GM's debt of some $300 billion is estimated to be some 5 times the value of all the gold in the United States Bullion Depository at Fort Knox in Kentucky or some 147.3 million ounces of gold bullion worth some $62 billion. However, this is just an estimate as unlike other U.S. government assets which are audited on an annual basis by the General Accounting Office or GAO there has not been a proper audit of the U.S. bullion reserves since the Eisenhower Administration.

Interest must be paid on GM's debt and on average interest payments of around 5% per annum would equate to payments of $15 billion per annum. This is the entire market capitalisation of GM being paid in debt repayments per annum. This does not bode well for workers, bondholders and shareholders and pension funds which hold GM bonds and or shares.

From Safehaven.com (March 29, 2005)

http://www.safehaven.com/article-2812.htm' rel="external nofollow">

GM and Ford appear to be, ready for it, ready, ready....."too big to fail." Where have we heard that before?

[newbonic]

It's amazing how GM stays afloat, considering that's bleeding cash from every orifice too.

Their problems stem from their obsolescent product ranges in their core US market (avg fuel consumption <20mpg). The japanese and german manufacturers (esp the japs) are killing them. Ford & GM are considering starting production of their european models in the US in response, to replace their pick-ups and SUVs whose sales are plummeting.

They also have massive pension liabilities.

[bobthe~]

It's amazing how GM stays afloat, considering that's bleeding cash from every orifice too.

GM's market capitalisation is $15 billion and it has debt of some $300 billion.

GM's debt of some $300 billion is estimated to be some 5 times the value of all the gold in the United States Bullion Depository at Fort Knox in Kentucky or some 147.3 million ounces of gold bullion worth some $62 billion. However, this is just an estimate as unlike other U.S. government assets which are audited on an annual basis by the General Accounting Office or GAO there has not been a proper audit of the U.S. bullion reserves since the Eisenhower Administration.

Interest must be paid on GM's debt and on average interest payments of around 5% per annum would equate to payments of $15 billion per annum. This is the entire market capitalisation of GM being paid in debt repayments per annum. This does not bode well for workers, bondholders and shareholders and pension funds which hold GM bonds and or shares.

From Safehaven.com (March 29, 2005)

http://www.safehaven.com/article-2812.htm' rel="external nofollow">

GM and Ford appear to be, ready for it, ready, ready....."too big to fail." Where have we heard that before?

If that is their market cap in 2005 it is waaaay out of date.

Last I heard, 9bn.

Plus 150bn in "Unfunded Pension Liability" which if I remember correctly is what they need to pay in pensions that are not in the overall pension fund pot (hence unfunded).

All this info courtesy of an email from a mate, so it must be true.

[interestrateripoff]

http://news.moneycentral.msn.com/provider/...&id=8808168

Ford Motor Credit's 8 percent notes due in 2016 fell to 76 cents on the dollar, down from 78 cents before the rating warning and about 79 cents on Thursday, according to MarketAxess.

GM's 8.375 percent bonds due 2033 fell to 65 cents on the dollar, down from 66 cents before S&P's warning and 67.5 cents on Thursday, according to MarketAxess.

The cost of protecting GM's debt with credit default swaps for five years rose to 27.25 percent in an upfront payment, plus annual premiums of 500 basis points, up from 24 percent upfront and 500 basis points annually on Thursday, according to data from CMA DataVision. That means is now costs $2.725 million upfront, plus $500,000 annually to protect $10 million of GM's debt.

Ford's five-year credit default swaps rose to 24.5 percent upfront, plus 500 basis points annually, up from 21.25 percent upfront plus 500 basis points on Thursday, according to CMA DataVision.

So the market thinks GM will still be around in 2033!!!!!!! Or should that be 2013?

Edited July 24, 2008 by interestrateripoff

[contractor]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

If ford has made a loss 6 times out of the past 8 quarters how can it still be remaining in business??? They must have either very clever accountants or very bad ones.

The same way you can spend money 6 days out of 8 and still be solvent. Different financial statements cover different things. Cash flow and profit and can look very different.

Don't forget that about 6 months before the credit crunch Ford got *very* favourable rates on mortgaging its US plant assets.

[Injin]

http://news.moneycentral.msn.com/provider/...&id=8808168

So the market thinks GM will still be around in 2033!!!!!!! Or should that be 2013?

Too big to fail.

How else will tractor production be maintained if these guys collapse????

[interestrateripoff]

http://www.independent.co.uk/news/business...unk-495227.html

By Michael Harrison Business Editor

Friday, 6 May 2005

America's two biggest car makers, General Motors and Ford, yesterday suffered the humiliation of seeing their huge debts downgraded to junk status by the ratings agency Standard & Poor's.

America's two biggest car makers, General Motors and Ford, yesterday suffered the humiliation of seeing their huge debts downgraded to junk status by the ratings agency Standard & Poor's.

Between them, the two automotive giants have debts of $460bn (£241bn) and the effect of S&P's downgrade will be to make it more expensive for them to service those debts.

..................

S&P cited very similar reasons for cutting Ford's $161bn of debt to junk status. Like GM, it said the profitability of Ford's SUV business was coming under increased pressure while loss of market share and rising employee costs had also harmed its efforts to become more competitive through capacity reductions.

[symo]

A former classmate was at Dagenham and had to go the US to look around. All he could see was workers doing there job badly protected by a union that enforced a job description and did not allow other people to skill for another role. Unions also protected notorious poor quality workers so even if they were not even trying then the union would not allow them to be sacked.

Unfortunately this level of protectionism runs throughout an economy that alledgedly believes in globalisation.

[The Masked Tulip]

I think the benefit of this will be that we eventually get small cars capable of taking tall and fat Yanks sat behind the steering wheel... as opposed to all those Corollas, Auris, Focuses, Golfs, etc, etc, which seemed designed only for people under 6 foot.

[VacantPossession]

If anything, the US government is even more keen not to let Ford or GM sink than it is keen to prevent banks melting down. The entire system of US legislature, banking, Bush's cabinet and the huge lobby system in the US has a deep vested interest in not letting the motor industry go belly up. Even if it wanted it to let it die, it cannot......because the just about servicable extreme debt would create a black hole in the US economy if it was called in.

Both firms, but particularly Ford, have been living in cloud cukoo land for over a decade. How they could not see the current situation developing (with their large team of analysts and "economists") is scarcely believable.

Nearer to home, of course this is the REAL reason why Nu Lab want to penalise owners of older cars with a punitive extra tax. It is NOTHING to do with being green (indeed the carbon footprint of a new car bought every three years is far greater than preserving a well maintained old car for nine years). It is entirely to do with supporting the European motor manufacturing industry.

VP

[interestrateripoff]

Both firms, but particularly Ford, have been living in cloud cukoo land for over a decade. How they could not see the current situation developing (with their large team of analysts and "economists") is scarcely believable.

VP

Perhaps they employ the same people who also work in central banks? They didn't see it coming either.

[Leonard Hatred]

Ford & GM are considering starting production of their european models in the US in response, to replace their pick-ups and SUVs whose sales are plummeting.

"It's not a Vauxhall Astra, it's a Pontiac LeMans!"

[Kurt Barlow]

I think the benefit of this will be that we eventually get small cars capable of taking tall and fat Yanks sat behind the steering wheel... as opposed to all those Corollas, Auris, Focuses, Golfs, etc, etc, which seemed designed only for people under 6 foot.

I read that they are retooling at least one factory to churn out focuses and fiestas - which selling like hotcakes in the US - well relative to their other models.

I suspect its all too little too late - Toyota, Honda etc are miles ahead.

[Executive Sadman]

Will Americans like driving around in small cars??? Will they be able to fit in them?

In the course of a few months their best selling vehicle has changed from the F150 truck (5.4V8, 13mpg) to a Honda Civic (1.8, 35mpg). Best Selling car here is the Ford Focus (ie same class). If all that its taken to get them into the same size vehicle as Europe is $4 gallon fuel, it makes me think how unnessessary all the extra tax we pay here is. (Other than fleecing the poor)

A friend used to have a 2001 Grand Cherokee, and it was absolutely tiny inside, if anything a civic seems roomier. Besides all the drivers in these Hummers etc are 5 stone soccer mums (so i hear)

[Kurt Barlow]

In the course of a few months their best selling vehicle has changed from the F150 truck (5.4V8, 13mpg) to a Honda Civic (1.8, 35mpg). Best Selling car here is the Ford Focus (ie same class). If all that its taken to get them into the same size vehicle as Europe is $4 gallon fuel, it makes me think how unnessessary all the extra tax we pay here is. (Other than fleecing the poor)

A friend used to have a 2001 Grand Cherokee, and it was absolutely tiny inside, if anything a civic seems roomier. Besides all the drivers in these Hummers etc are 5 stone soccer mums (so i hear)

Apart from the fact that we would have become a net oil importer by about 1990 instead of 2006.

One of the benefits of high fuel taxes has been to delay the day when we started to import. Also I would be interested to know where income tax would be if we had US levels of fuel taxation

Edited July 24, 2008 by Kurt Barlow

[Saving For a Space Ship]

Ford & GM are considering starting production of their european models in the US in response, to replace their pick-ups and SUVs whose sales are plummeting.

The conversion from European model to Us is easy, just put bull horns on a Ford Mondeo

[Executive Sadman]

Apart from the fact that we would have become a net oil importer by about 1990 instead of 2006.

One of the benefits of high fuel taxes has been to delay the day when we started to import. Also I would be interested to know where income tax would be if we had US levels of fuel taxation

Im not saying that we have US levels of taxation, what i am saying is $4 a gallon seems to be the point where people drastically change their car choices, anything above that is just the government fleecing people. Pre 1980 we had some of the cheapest petrol prices in europe and still drove small cars. We certainly dont have the cheapest petrol in europe now, but drive more than most of europe. How you get to the conclusion that the day we import more would change i dont know.

Obviously id prefer govt to reduce its spending, but given that that is always out of the question, id prefer it went on income tax (ie a tax based on ability to pay) but i guess now all parties toe the thatcherite line of regressive indirect taxes over progressive income taxes.

[MrPin]

Remember, a very large part of the business of Ford, and GM, is selling

car-finance, not vehicles!

If most people have one, and it works, well then keep it, even if it's become un-fashionable!

Surely that's better than "recycling" it to get another loan

on that new "greener" model!

It's the lack of loans that's hurting these businesses!

The whole reason for the new "green" road fund licence bands, is to encourage

"recycling", churn, and more loans!

I've met some very well off people, who have absolutely no SHAME in driving a pretty old car.

Probably paid cash for it, look after it properly! And DON'T need to look flash to feel good!

Edited July 24, 2008 by MrPin

[interestrateripoff]

It's the lack of loans that's hurting these businesses!

The whole reason for the new "green" road fund licence bands, is to encourage

"recycling", churn, and more loans!

If it's the lack of loans that's the problem how are they going to get recycling of the loans?

[Kurt Barlow]

Im not saying that we have US levels of taxation, what i am saying is $4 a gallon seems to be the point where people drastically change their car choices, anything above that is just the government fleecing people. Pre 1980 we had some of the cheapest petrol prices in europe and still drove small cars. We certainly dont have the cheapest petrol in europe now, but drive more than most of europe. How you get to the conclusion that the day we import more would change i dont know.

Obviously id prefer govt to reduce its spending, but given that that is always out of the question, id prefer it went on income tax (ie a tax based on ability to pay) but i guess now all parties toe the thatcherite line of regressive indirect taxes over progressive income taxes.

People has small cars in the 1970s because we were far poorer and cars had pretty crap fuel consumption full stop. Im fairly certain if we removed taxation on fuel any advances we had made in energy efficiency would just be rolled back by people purchasing bigger vehicles.

I execpt the point about indirect taxes being regressive but this can be offset elsewhere. Likewise I agree in respect of the point about levels of govt spend but thats another debate.

In theory of course we should of used our oil wealth including tax revenue from it on building energy security for the day we no longer had independance - well we all know what happened there.

Look at Norway - 3rd biggest exporter of oil in the World and also happen to have the most expensive petrol. In their case the revenues are going into infrastructure / sovereign wealth funds.

[interestrateripoff]

Look at Norway - 3rd biggest exporter of oil in the World and also happen to have the most expensive petrol. In their case the revenues are going into infrastructure / sovereign wealth funds.

And our oil profits went to the rich and bureaucrats wages?

Did we either have a sovereign fund???