Thursday January 29, 05:15 PM
Ford plans cuts but won't seek US aid in wake of 5.9 bln Q4 loss
By Mira Oberman
CHICAGO (AFP) - Ford Motor Co. will make even deeper cuts to its operations in the wake of a 5.9 billion dollar fourth quarter loss but said Thursday it had "sufficient liquidity" to fund its turnaround plan without US government aid.
The number two US automaker's results showed a sharp widening of its losses as auto sales were slammed in the fourth quarter by a deep economic crisis and credit squeeze.
Ford's loss in the fourth quarter was more than double the deficit in the same period in 2007 of 2.8 billion dollars.
Ford posted a whopping loss of 14.57 billion dollars for the year, compared with a 2.7 billion dollar loss in all of 2007.
But Ford said that unlike rivals GM (NYSE: GM - news) and Chrysler, it had enough cash to keep operating as it executes a restructuring plan and remains "on track" to break even or return to profitability in 2011.
"Based on current planning assumptions, (Ford) does not need a bridge loan from the US 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," Ford said in a statement.
The Detroit giant said was drawing down the remainder of its line of credit, some 10.1 billion dollars, due to "concerns about the instability of the capital markets" but "has sufficient liquidity to fund its business plan and product investments."
Ford said it finished 2008 with 24 billion dollars in available liquidity after burning through 5.5 billion dollars in cash in the fourth quarter and 21.2 billion in the year as a whole.
The automaker said it expects its cash burn to slow in 2009 as demand rebounds as a result of government stimulus packages but warned that global sales will likely fall by a record 10 percent this year.
"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," said Ford president and chief executive Alan Mulally.
"We continued to take the decisive actions necessary to lower production to match the lower worldwide demand and reduce costs, which we expect will allow us to significantly reduce negative operating cash flow in 2009 and position Ford for growth when the economy rebounds."
Ford planned to cut its North American production by nearly 300,000 vehicles to 400,000 vehicles in the first quarter. European production was set to be slashed by 214,000 vehicles to 325,000 units.
The iconic US automaker has already shed tens of thousands of jobs and closed plants in an effort to cut costs, and sold off the bulk of its luxury European marks, including Jaguar and Aston Martin. It is considering the sale of Swedish brand Volvo (Stockholm: VOLVB.ST - news) and hopes to cut automotive structural costs by four billion dollars in 2009.
Thursday, Ford said it would cut 1,200 jobs at its Ford Motor Credit unit in response to weak conditions.
The announcements by Ford comes with the US automotive sector on the brink.
Ford's cash-strapped competitors GM and Chrysler were granted 13.4 billion dollars in government loans in order to keep their operations going amid the sudden downturn. After initially requesting a nine billion dollar line of credit, Ford later told Congress it had sufficient cash on hand to get through the sales slump.
GM and Chrysler must submit a detailed restructuring plan by February 17 and a yet to be appointed "car czar" must certify by March 31 that they are making progress in carrying out the plans.
US auto sales fell 18 percent last year to their lowest level since 1992 and are forecast to fall by up to three million vehicles this year to between 10.5 and 12 million units.
Sales have hovered between 16 and 17 million vehicles for the past decade and have not been below 12 million since the recession of 1982 when the United States had 74 million fewer people than today.
Ford is basing is plans on US total industry sales of 11.5 to 12.5 million vehicles, which would represent a drop from 2008 levels but a rebound from weak sales pace of the final months of the year.
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