Can Ford Leave GM in Rearview?

At some point soon, Ford ( F) shares will likely close at a higher price than General Motors' ( GM), reversing a decades-old pattern.

The shift would be largely symbolic as Ford passed GM in market capitalization years ago, but meaningful to the extent that it would reflect the success of Ford's continuing effort to distance itself from its Detroit rival.

On Thursday, Ford traded higher than GM at times during the day, but closed lower, down 6 cents to $1.81. GM closed down 34 cents to $1.86.

As the share-price moves reflect, the two icons' different directions have rarely been more clearly delineated than during the past 24 hours.

Wednesday evening, Ford said it is moving to restructure debt, reducing liabilities and future interest payments. Generally, such efforts are viewed positively, although initially they represent a distressed exchange for debt holders, who would not receive full value.

Meanwhile, on Thursday, GM indicated in a filing that its auditor has raised "substantial doubt" about its ability to continue as a going concern.

The disclosure, included in the company's 10-K filing with the Securities and Exchange Commission, said "recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern."

The company conceded that failure to execute its viability plan may force a bankruptcy -- assuming it does not receive more federal assistance.

In truth, GM said last week, as it reported fourth-quarter earnings, that its auditors had raised the going concern question. And GM has said repeatedly that it cannot stay afloat without more government help.

"It's not new news," said Standard & Poor's analyst Efraim Levy in an interview. "Rationally, the stock should not move on that news. But the stock market is not always rational."

Reacting to the furor over the filing, GM reminded Thursday that the opinion was not unexpected. "Once global automotive sales recover and GM's restructuring actions generate the anticipated savings and benefits, the company is expected to again be able to fund its own operating requirements," the company said, in a press release.

S&P has a sell on GM because it will either have to issue more equity, diluting existing shares, or it will file for bankruptcy protection, eliminating all value in the shares. The firm has a hold on Ford.

Ford said Wednesday it will use cash and equity to retire up to $10.4 billion of debt. Although Ford, unlike GM and Chrysler, has not sought a federal loan, the company is seeking to match the requirements of its competitors' federal loan terms, reaching a deal with the United Auto Workers on health care funding and seeking a deal with debt holders.

"We wanted to fully participate in the industry restructuring even though we didn't intend to seek a government bridge loan," says spokesman Mark Truby.

Levy says Ford generally faces the same problems as GM. "Both are overexposed to the truck segment, both are losing market share, both have too many dealers, and both face an automotive depression: Sales declined 18% in 2008 and are going to decline 20% or more in 2009," he says.

Still, Levy reminds, Ford CEO Alan Mulally arranged to borrow $24 billion soon after arriving at Ford in 2006. "Ford's key advantage in this environment is that they went to market and mortgaged assets to get liquidity in advance, so they don't have to beg the government for credit," he said. "That's the key difference: one company got the cash at the right time."

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