The CEO of Ford (NYSE:F) may be the last to know. An economic downturn is likely to hurt car sales. The company stock is near a 20-year low. But Alan Mulally elected to state the obvious. "For us, any slowdown in the economy -- the housing industry, financing of vehicles, tightening of credit, housing starts -- it puts a lot of pressure on consumer confidence to buy big-ticket items," he told Reuters.
What Mr. Mulally did not say is that cutting production may not be enough to save Ford. With its shares near $6, it trades where it did about two years ago when there were rumors that the company might go bankrupt.
Ford may not have enough capital on hand to handle a sharp and prolonged recession in the US. Its market share is already down to about 15%, and there is no guarantee that Japanese competitors will show it any mercy.
While Ford is not likely to see protection from the courts, it may have to raise additional capital to cover losses. If so, the dilution could take the company's shares down much further.
Perhaps that is Mulally's real concern.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-09-2008 @ 9:35AM
Dan Barnett said...
Since Ford eliminated their dividend last summer, isn't F stock a real "take a shot" pick? It seems to have nothing going for it.
1-09-2008 @ 10:53AM
jpdr1100 said...
This is a pity because their vehicle line-up is finally starting to come around.
1-09-2008 @ 1:48PM
Brian said...
I hope Ford makes it through this recession. It is unfortunate they took so long to realize that they operate in a world economy and can't continue to pay huge amounts to the labor unions. It is an even bigger unfortunate situation for the workers who've priced thier jobs out of the market.
1-09-2008 @ 8:59PM
bill said...
i still think they can pull it out many years through much worse ford trucks will keep them going
1-10-2008 @ 10:03AM
jpdr1100 said...
It's poor truck sales that are sinking them!