01—Abstract
Summary
Summary of the 10-K filed February 26, 2009. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2008 Form 10-K, filed February 26, 2009, shows a company in deep crisis.
Total Company net loss was $14.7 billiona ($6.46 per share), against a $2.7 billion loss in 2007. Sales and revenues fell to $146.3 billion from $172.5 billion. Automotive gross cash fell by $21.2 billion to $13.4 billion, and Automotive operating-related cash flow was negative $19.5 billion.
Stockholders' equity turned negative at $(17.3) billion, down about $22.7 billionb in one year. Ford took a $5.3 billion impairment on North American fixed assets and a $2.1 billion impairment on Ford Credit operating leases, both tied to the collapse in used truck and SUV auction values and the shift in consumer preference toward smaller vehicles. Liquidity is the central investor concern.
In February 2009 Ford borrowed $10.1 billionc under its $11.5 billion secured revolver, and management states it does not expect to need a government bridge loan. The company's own planning case assumes 2009 U.S. industry sales of 10.5 to 12.5 million units, and management says the company can absorb a 20% U.S. and 10% European downside without impairing funding. Ford also cites $14 to $17 billion of announced Automotive cash improvement actions for 2009 to 2010, a tentative UAW agreement, and pending DOE and EIB loan applications of roughly $2 billion expected in 2009.
Credit ratings were cut to CCC-range by all four NRSROs, and Ford Credit's managed leverage is 9.9 to 1. The auditor included an emphasis paragraph on the economic conditions but did not qualify its opinion. Management concluded there is no substantial doubt about going-concern status.
The filing also highlights structural issues. Market share in the U.S. fell to 14.2%d in 2008 from 18.0% in 2004. Ford is restructuring North America by closing plants, cutting dealers from about 4,400 to 3,800, and shifting capacity to small cars.
It is also reviewing strategic options for Volvo, including a possible sale. The company sold Jaguar Land Rover in June 2008 and reduced its Mazda stake to 13.78%. Regulatory risk is significant as well, particularly from California and state greenhouse-gas standards and tougher federal fuel economy rules.
02—Key points
Key Highlights
- Net loss of $14.7 billion ($6.46/share) in 2008, versus a $2.7 billion loss in 2007; Automotive pre-tax loss of $11.8 billion.
- Automotive gross cash declined $21.2 billion to $13.4 billion; negative operating-related cash flow of $19.5 billion.
- Stockholders' equity of $(17.3) billion, a swing of roughly $22.7 billion year over year.
- $10.1 billion drawn on the $11.5 billion secured revolving credit facility in February 2009; the Lehman unit's $890 million commitment was not funded.
- $5.3 billion North America fixed-asset impairment and $2.1 billion Ford Credit lease impairment, driven by falling used-vehicle auction values.
- U.S. combined car and truck market share fell to 14.2% in 2008 from 18.0% in 2004; wholesale volume down 16% to 5.5 million units.
- Credit ratings cut to CCC-range (S&P CCC-, Moody's Ca) and Ford Credit to B-/Caa1 territory; management plans $14–17 billion in 2009–2010 Automotive cash actions and a 2011 breakeven target.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2008, Ford Motor Co lost $0.10.
- Revenue$143.58B100.0%
- Cost of revenue−$126.62B88.2%
- Gross profit$16.96B11.8%
- Operating costs−$31.74B22.1%
- Operating income−$14.78B10.3%
- Interest, other & tax$9.0M0.0%
- Net income−$14.77B10.3%
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 26, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $143.58B$170.57B | −15.8% |
| Cost of Revenue | $126.62B$142.59B | −11.2% |
| Gross Profit | $16.96B$27.98B | −39.4% |
| R&D Expenses | $7.10B— | — |
| SG&A Expenses | $21.07B$21.17B | −0.5% |
| Operating Expenses | $159.30B$177.86B | −10.4% |
| Operating Income | -$14.78B-$2.84B | −421.0% |
| Interest Expense | $9.74B$11.04B | −11.8% |
| Net Income | -$14.77B-$2.79B | −428.3% |
| EPS (Basic) | $-6.50$-1.41 | −361.0% |
| EPS (Diluted) | $-6.50$-1.41 | −361.0% |
| Shares Outstanding (Basic) | 2.27B1.98B | +14.9% |
| Shares Outstanding (Diluted) | 2.27B— | — |
05—Questions
Frequently Asked Questions
Is Ford at risk of bankruptcy or needing a government bailout?
Management states there is no substantial doubt about Ford's ability to continue as a going concern and says it does not expect to need a bridge loan from the U.S. government for Automotive liquidity. The company drew $10.1 billion on its secured revolver in February 2009 and says it can withstand a 20% U.S. and 10% European sales decline from its planning midpoint. The filing still warns that a major supplier or competitor bankruptcy, or a sales decline beyond those levels, could require additional financing that may only be available through government assistance.
Why did Ford post such a large loss in 2008?
The loss reflected a sudden and sharp drop in industry sales, especially in the second half of 2008, which produced $6.9 billion of unfavorable volume and mix. Other large drivers were $5.3 billion of North America asset impairments, lower returns on cash and trust assets, and a $0.6 billion Jaguar Land Rover held-for-sale loss. Ford Credit also took a $2.1 billion operating lease impairment because lower used-truck and SUV values raised residual risk. Cost reductions of $4.3 billion partly offset these losses.
What is Ford's restructuring plan?
The plan has four pillars: restructure to operate profitably at current demand, accelerate new product development (especially small and fuel-efficient cars), finance the plan and improve the balance sheet, and work as one global team. Specific steps include converting three U.S. assembly plants to small-car production, closing two Ford and two ACH plants in 2009–2011, cutting salaried personnel costs, reducing capital spending to $5–5.5 billion, and continuing to reduce the dealer network and supplier base. Management also announced it is evaluating strategic options for Volvo, including a possible sale.
What does the filing say about 2009 expectations?
Ford expects global industry sales to fall roughly 15% in 2009, with U.S. industry volume planned at 10.5 to 12.5 million units and European volume at 12.5 to 13.5 million units. It expects Automotive operating-related cash flow to remain negative but significantly improved from 2008. It targets quality improvement, about $4 billion of structural cost reductions, and stable U.S. share. Management says the company and Ford Credit are on track to reach at or above breakeven in 2011, excluding special items.
06—Continue