Ford Keeping Head Above Water

Ford Motor Co., seemingly the only U.S. auto maker not teetering on the brink of financial ruin, said Friday it swung to a $1.4 billion operating loss during the first quarter.

However, the results were much better than what Wall Street expected from the auto maker, and the company said it believes it has more than enough cash to survive a downturn without turning to the government for help.

For the first quarter, Ford reported to an operating loss of $1.4 billion, or 75 cents a share, compared with a profit of $70 million, or 3 cents a share, from a year ago.

The earnings were much better than what was expected by industry analysts, who were looking for a loss of $1.23 a share, according to Thomson Reuters.

“Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world,” said Ford President and Chief Executive Alan Mulally. “Despite the challenges, Ford made strong progress on our transformation plan.”

Revenue fell dramatically during the quarter to $24.8 billion, down from $39.2 billion from a year ago.

While the company did report a loss, the company said during the quarter it was able to lower its long-term debt obligations by $10.1 billion and was able to negotiate down its annual labor costs by $500 million.

Ford’s cash burn rate, which is considered a key metric for this company in a long-term turnaround plan, was chopped to $3.7 billion during the quarter. That’s compared to a quarterly burn rate of $7.2 billion a quarter ago.

The company now holds approximately $21.3 billion in cash and short term liquidity on hand – more than enough to meet the company’s financial needs for 2009, the company’s chief financial officer said. Its cash holdings are up from $13.4 billion at the end of 2008.

“It (is) more likely that Ford will make through 2009 and beyond with little risk of bankruptcy and no government support,” said Bank of America – Merrill Lynch analyst John Murphy in a note to investors. Merrill upgraded the stock from a “neutral” to a “buy.”

Most of Ford’s pain was felt in their North America operations. Ford North America reported a pre-tax loss of $637 million, compared with a loss of $45 million from a year ago. Revenue in the unit was $10.2 billion, down from $17.1 billion a year ago.

The auto maker’s European unit reported a $550 million loss compared with a profit of $739 million compared to a year ago. Ford said it has begun negotiations with interested parties regarding to the sale of its Volvo brand.

Ford, which is considered much more healthy than its competitors General Motors (GM: 1.68, 0.0583, 3.59%) and Chrysler, said it had more than enough liquidity to last through this financial crisis. The company expects to at least break even on an operating basis by 2011.

Ford’s better than expected earnings come on the heels of reports late this week that Chrysler is now within days of filing for a government-sanctioned bankruptcy. A bankruptcy for General Motors has become also a distinct possibility as well – both events Merrill’s Murphy sees as a competitive “gain” for Ford.

Story provided courtesy of www.foxnews.com