Despite losing $5.9 billion in the fourth quarter and $14.6 billion in 2008, Ford ( F) reiterated Thursday that it has no plans to seek a government bailout and will tap an earlier-secured credit line. But the automaker does expect the same concessions from stakeholders that GM ( GM) and Chrysler get. "It's a very volatile time for all of us, but with the (government) actions on fiscal policy and monetary policy, we think that's going to support the economic turnaround and it's not our plan to access the government money," said CEO Alan Mullaly, on a fourth-quarter conference call Thursday. "We have sufficient cash to access product development and restructuring." Ford is "in a different place and much further along" than the other two Detroit automakers, Mullaly said. Although it is seeking a $9 billion line of credit from the government, Ford is not part of the $17.4 billion bailout for GM and Chrysler, which comes with the requirement that the two companies show how they can reduce costs and debt, Still, "from ongoing conversations we're having with all the stakeholders and the U.S. government, we will not be disadvantaged," Mullaly said. Although Mullaly declined to provide details of talks with debt holders, Ford did say Friday that the United Auto Workers union agreed to end the jobs bank program at Ford, just as it has at the other two Detroit automakers. The Ford program covers about 1,500 workers. The two parties are working out implementation details. Meanwhile, Ford will draw on its available credit lines, adding $10.1 billion to its cash reserves on Feb. 3. One of the key things separating Ford from competitors is that it secured credit two years ago, before the global financial collapse.
"Our plan is to not use that money to fund the ongoing operations," Mullaly said. "(But) with the volatility, with the credit markets and uncertainty in the global markets, it was just a prudent time to move that asset over to us." As of Dec. 31, Ford's total liquidity was $24 billion, including automotive gross cash of $13.4 billion. In the end, of course, Ford's need for additional capital will depend on sales. Ford currently predicts 2009 domestic-vehicle sales between 11.5 million and 12.5 million units. In its December report to Congress, the company said that at rates of 10.5 million sales in 2009 and 2010, it would need $13 billion, under a scenario where "a prolonged economic slump persists into 2010
as significant monetary and fiscal policy easing does not provide any stimulus to consumer and business spending." But that is not the company's expectation. In a report Thursday, Standard & Poor's analyst Efraim Levy wrote that although Ford "appears to be making extreme efforts not to use federal funding," he remains concerned about the company's financial condition, "given our rapidly deteriorating global automotive demand forecast and risk from bankruptcies of industry participants of various sizes. "The company's drawing of $10B of credit facility funds helps mitigate our liquidity concerns for the near term, but we think weaker global industry demand will lead to continued cash outflows in '09," Levy wrote. At midday Thursday, Ford shares were trading at $1.97, down 6 cents. GM shares were at $3.43, up 1 cent.
For the quarter, the company lost $2.46 a share. Special items reduced pretax profits by $1.4 billion in the fourth quarter, or $1.09 a share, largely reflecting costs associated with personnel reductions and retiree health-care charges related to the VEBA agreement with the UAW. The loss excluding items was $1.37. Analysts surveyed by Thomson Reuters estimated $1.30. During the same period a year earlier, Ford lost $2.8 billion, or $1.33 a share. Revenue declined 16.3% to $29.2 billion. Analysts estimated $27.1 billion. The decline reflects lower volume, the June sale of Jaguar Land Rover and exchange translation, the company said. Ford said it reduced automotive costs by $1.4 billion in the fourth quarter and by $4.4 billion for the full year. Since year-end 2005, the North American cost reductions totaled $5.1 billion. Additionally, the company said its product share transformation enabled a full-year market share gain in Europe and a fourth-quarter gain in the U.S. Looking ahead, after the $14.6 billion loss made 2008 its worst year ever, Ford said it "remains on track for both its overall and its North American Automotive pretax results to be at or above breakeven in 2011, excluding special items." Mulally also said Thursday that it would not come to the aid of struggling Visteon ( VC), one of its main parts dealers, despite the breakdown that would occur in the supply chain should it fail. Mulally said the company wouldn't rush in to aid Visteon, a 2000 spinoff. "Visteon and Ford are clearly in a different place," he said, adding that Visteon supplies parts to other auto companies as well. "They have really diversified their portfolio."
Van Buren, Mich.-based Visteon has cut 2,800 jobs in recent months and earlier this month said it would shift 2,000 additional workers in Michigan to a four-day work week and cut their pay. Visteon has about 35,000 employees in 27 countries. The company delayed its fourth-quarter results, but expects to report lower product sales for the quarter and full-year 2008. It is also on track to cut 800 salaried employees by the end of the first fiscal quarter. Ford, looking to stem its worst annual loss in its 105-year history amid a global downturn in sales said rescuing Visteon is not a part of its plan. "We not contemplating any dramatic action," said Ford Executive Vice President and Chief Financial Officer Lewis Booth. "No. All we have seen is the press reports." In the past, Ford has taken over plants Visteon has been unable to sell, hired back workers and helped pay retiree benefits. Visteon is second only to former General Motors unit Delphi among U.S. auto parts suppliers, and its recent prospects have mirrored the downturn at the Big Three automakers. GM has pumped billions into Delphi, which has been trying to emerge from Chapter 11 bankruptcy since 2006. In some ways Ford isn't as dependent on Visteon as GM is on Delphi, but automaker executives have repeatedly said a disruption in the supply -- meaning a bankruptcy -- could spell disaster. "We along with Visteon, with all of our suppliers, we are talking to all of them weekly because the most important thing we do is continue to make progress and deal with this overcapacity and keep the supply chain going," Mulally said during the conference call.
Visteon is also in danger of being delisted from the New York Stock Exchange, as it has failed to meet a minimum market capitalization of $75 million. The company, which supplies carmakers with satellite radios, instrument displays, electronic climate controls and other parts currently has a market cap of $19.6 million. Shares of Visteon fell 1 cent to close at 15 cents, while Ford shares lost 8 cents, or 3.9 percent, to finish at $1.95.