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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerFord Motor Co. (NYSE: F) is having awful trouble selling its cars. Its product mix, heavily dominated by gas-guzzling SUVs and pick-ups, is pushing the company to greater and greater financial loses in the U.S. In some recent months, sales year-over-year have dropped well in excess of 20%.
There has been some speculation that Ford may have to raise more money. The federal government helped with that, giving the car company a $445 million tax refund. The financial windfall comes from interest due on overpayments made by the firm during that past several years. According to Reuters, "the interest owed stems from tax overpayments in 1994, 1992, and the period 1983-1989."
Ford's stock rallied 6% on the news, moving up to $4.86.
Investors should be warned that the share increase is a bit of a "sucker rally." Ford's problems may extend well into 2009, especially if oil stays above $140 and consumer spending remains low.
Ford's stock still has a ways to drop.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
7-12-2008 @ 6:03PM
iouplenty2 said...
The tax refund is very unlikely. No agreement has been reached between Ford and the IRS. Ford Motor has actually filed a lawsuit in Federal Court trying to force the IRS to refund the money, which is not likely to succeed because there is a statutory 3-year-limit on how far back any taxpayer can go to claim any overpayment or other money allegedly owed by IRS and these claims date back as far as 25 years. No Federal Judge is going to set such a precedent because it would open a Pandora's Box.
Interesting, though, that this news item speaks volumes about the kind of slipshod corporate management and practices that got Ford Motor into its current mess. Whenever any business is failing or has failed, the blame can always be accurately laid at the doorstep of management. That management would now authorize such a baseless claim against the IRS to be filed reeks of desperation and is one indication that not much has changed since Ford's problems began.
In my opinion, Ford Motor will be back in Federal Court before the end of 2009 (then meeting with success) as it petitions for Chapter 11 Bankruptcy protection while it restructures its debt and recapitalizes its operations - that is the only way it will survive in its present form as a going concern. Of course, it is highly likely all outstanding Ford Motor common shares will be cancelled as a result of any such action and that makes (F) a very risky investment.
If you can afford to lose it all, roll the dice on (F). If you can't, find another stock.