The dire situation facing America’s car makers has been emphasized by the revelation that Ford could run out of cash next year if it doesn’t slash spending.
The company’s latest financial update revealed that it posted a loss of $129m (£81.8m) for the last quarter of 2008, with the worst performance coming from the north American part of the business. That’s less than the $380m (£241m) loss it posted for the same period last year, but the company’s running costs were $7.7bn (£4.9bn) during the last quarter.
That leaves Ford with cash reserves of just $18.9bn (£12.1bn) – enough to last for just seven months if it continues to spend money at the same rate. The plight of the 'big three' was further emphasised by GM's announcement it was suspending merger talks with Chrysler in the face of its own third-quarter losses.
>>Read Chas Hallett's blog on what the financial meltdown could mean for Chrysler
Ford is responding to the crisis with plans to conserve cash reserves with massive cuts. These will include reducing spending by up to $5.5bn (£3.5bn), doing away with all bonuses and slashing both engineering and advertising costs. Ford has already pulled all of its UK advertising across all mediums until the end of the year.
Despite the gloomy news in America, Ford of Europe made a profit (albeit down by $224m), and it’s south American operations posted an increased profit, up from $94m (£59.7m)to $480m (£304.9m).
Dan Stevens
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Re: Ford ‘could run out of money’
Phinehas
You're on the right track with that comment, the Ford F150 and F250 are shining examples of that dreadful philosophy to name but two models.
I think it was Dodge or GMC recently came up with a really good way to make Pick-ups economical by putting a Diesel in them - on paper it was a great plan until they went ahead and used commerical 6 cylinder 6.7 litre units which are usually found in Mid-size trucks and buses.
What has always baffled me about American motors is the simply awful fuel economy gained from large engines that have pathetic power returns. In Europe you can get reasonable grunt from most cars without having to have silly thirst and engine capacity plus they still burn fairly cleanly - bizarrely Ford and GM Europe can manage this quite easily yet don't appy it to the American market.
I heard a rumour a few days ago that GM may also be putting the paperwork in place in case they have to file for Chapter 11 (Commercial Bankruptcy). The sickening thing about this whole issue is that the workers that keep the factories turning will be the ones that lose out big time and may not be able to make ends meet.
Meanwhile the execs, as always, will walk away with their bank balance looking flush having given text book examples of how not to manage a large company, car producing or otherwise. The same thing happened to MG Rover; the Directorate walked away with over £1m a piece.
Re: Ford ‘could run out of money’
If GM and FoMoCo do go down it could be that the European, German essentially, arms of these two get split off first, then taken over, rationalised, and digested into the indigenous German makers, in some form. That's what I think.
I would not want VAG running Ford Europe or Opel. To me that conjures up a white goods approach to our cars in future. There will be little technical differentiation between marques and the customer will have a bargain basement option from the Far East or a German offering marketed as a premium product but ultimately lacking in cutting edge design that nets the manufacturer and dealer higher margins.
Re: Ford ‘could run out of money’
You can compliment my posterior as much as you want, but no touching.
I bet there's lots of people running round Ford Europe and Opel/Vauxhall trying to work out if there is any way they can cut the ropes. Unfortunately, you have to fear that both US managements will want to bleed them bone dry rather than let them fly the nest.