Tuesday, November 28, 2006

Ford Bets the Farm

To bet the farm is to gamble everything you have. There are two times you do it; when you are absolutely certain of victory or when you are desperate.

I fear that the Ford Motor Company is desperate. They are putting virtually all of their North American assets up as collateral for 18 billion dollars in financing, 15 billion of which would be secure loan.

They plan to use the money, more or less, as a floatation device while they restructure and downsize.

"This is Ford's one last shot to get it right," said Wall Street analyst John Casesa of the Casesa Shapiro Group LLC. "If the restructuring plan is not executed flawlessly, the company will lose its independence. Management is staking the entire future of the company on successfully executing this plan."

This is disturbing at several levels.

Ford is one of Michigan's biggest employers. We are still going to lose more jobs over the next couple of years and losing Ford entirely would be to rub salt into a festering wound.

Secondly, the fact that Ford needs collateral is a sign that its credit picture is troubling.

Third, this will put the company at the mercy of finance companies who have different priorities than most Americans.

Wall Street reacted with a further decline in the value of Ford stock which is now $8.15 cents a share. It is admittedly up from its low point in June but it is declining and is well below its normal value. Their non-secured bonds are considered nearly junk.

On a possibly good note, Michigan is making some changes in its business tax system. At the moment it appears to be little more than a shuffle of how its paid. It says that factories will pay less while bankers, real estate agents, and insurance companies will pay more. The problem is that these people will pass those taxes onto the others, resulting in no net gain.


Anonymous Anonymous said...

What do you know about Ford in regards to them doing business with our enemies like Iran and do you know anything about it that you can elaborate on? I caught a piece on it today on the radio.

They were saying Ford maybe potentially violating some laws ,for obvious reasons, by doing business with a nation that wishes to do us harm.

I drive an F350 and I'll get rid of it in a hurry if there's more to this than meets the eye.

I'd like to know your opinion on it bro...

1:09 AM  
Blogger Tim said...

Ford is in dire straights, but I think that they will come thru this a better company. The new CEO knows what he's doing. It was time for Bill Ford to accept that he just doesn't have the juice for the top slot and get someone in there that does.

Gunz- I don't know if Ford did anything wrong with their business dealings with Iran or Syria, but I doubt that they did, or at least not intentionally. Letting this comany go doen the drain will hurt national security way more than them selling a few spare parts or trucks to "the enemy".It seems as though everybody is just willing to let the US auto companies go down the toilet. This makes me angry. Putting your "I support the troops" sticker on your Japanese car to show your patriotism seems stupid. When these jobs go away, they will not ever come back. We outsource our jobs today, we'll be outsourcing our children tomorrow. Will they have to move to China, India, or Korea to get work?
It's not just Michigan suffering either. They have plants all over the US.
Real Americans support American companies.

11:04 AM  
Anonymous Anonymous said...

Great points Tim...

Appreciate it.

12:32 PM  
Blogger shoprat said...

Gunz This is the first I have heard of it. If it is true than rather than punish the company and its employees, let's find out who made the decision and prosecute the people who did it, not the employees and stockholders who would have never approved.

3:17 PM  
Anonymous Anonymous said...

I hear you there Shop. That's the way I feel about it also and dang I love my truck, I'd sure hate to part with it...LOL!

6:56 PM  
Blogger Skip said...

That really had me worried.... I didn't even realize anyone other than FORD built trucks!! LOL

7:38 PM  
Anonymous Anonymous said...

Ford's been having a bit of a time for a few years. People have to start buying American, plain and simple. The advantage seems to be in favor of the foreign makers getting around a lot of the regulations.

8:08 PM  
Blogger Lone Pony said...

That's so sad! I love my Ford vehicles. I've driven an Explorer for several years now. I'm a Mustang girl! sigh...

8:44 PM  
Blogger Skip said...

Only problem is.... "BUY AMERICAN" who owns what?? Toyota, Honda and VW have as much or more built in the US as the others...

9:17 PM  
Blogger Crazy Politico said...

Skip, go buy a Sierra 2500HD, you'll wonder why Ford bothers building trucks :)

Shoprat, I think that there is a potential upside for Ford overall with this type of financing, though the Unions will hate it. If the company continues to be a profit sink investment banks are much more likely than the current leadership to look for a Chapter 11 solution to the problem.

The unions would dislike it because it would cause them great pain to explain some of their benefit packages to the judge who would hear the case. In all likelihood it would cause some short term worker pain, but overall stability, and an ability to become profitable in the future.

7:41 AM  
Blogger Tim said...

Count on CP to stick up for the Japanese at the expense of his fellow Americans. So CP, why this angst that your fellow Americans are making a decent wage? Envy? I notice you usually never miss a chance to take a swipe at the unions. This is bigger than Republican vs. Democrat. This is about our country's jobs going overseas and our kids following in 20 years. I know this is blasphemy to a Republican idealogue like yourself, but sometimes free market capitalism is not the solution to the problem. Our overseas competition creates advantages for their companies, so you really don't have a level playing field. Will you be happy when every asset in America is owned and/or ran by corporations from overseas? Maybe you should learn to speak Chinese. Your grandchildren probably will have to.

9:19 AM  
Blogger Gayle said...

I'm not going to get in the middle of this dialogue because I don't know enough about it. I will say that I hope Ford doesn't go down the tubes, even though I prefer Dodge. Let's hope the restructuring plan is executed flawlessly. Just imagine all the jobs that will be lost if it isn't!

6:01 PM  
Anonymous Anonymous said...

wait a minute - are you all trying to tell me that there are other trucks on the road!!!??? get outta here....really?!!!! (tongue firmly implanted in cheek)........

7:03 PM  
Blogger shoprat said...

For the record, Toyota is more American Made than many if not most, GM and Fords. They are simply not union-made which is perfectly alright with me, as I consider the union little more than a criminal racket.

I'm not much of a truck guy so I will stay out of that debate.

7:31 PM  
Blogger BB-Idaho said...

Something of an anomaly for a liberal: I only buy US vehicles.
(Dodge/Chrysler like Gayle above)
But, then, I'm old enough to remember Guadalcanal and Peleliu.
I don't think the country will let
Ford go under...remember when they
bailed out Lee Iacoca?

7:40 PM  

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