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Ford Motor CEO warns of stagnant sales through 2009

Alan Mulally, the CEO of Ford Motor Company (NYSE: F), voiced an unequivocally gloomy opinion about the future of the auto industry at the Paris Auto Show. After reporting a 34% plunge in auto sales for the month of August, Mulally warned reporters that "2009 is not going to be better than 2010. We won't see a recovery until 2010." He added, "The [economic] downturn is longer and deeper than we foresaw a year ago."

The auto exec added that it now expects the Russian market to stagnate next year; previously, Russia was the fastest-growing European market for Ford. Mulally sighed, "The problems of subprime and credit crunch are now all over the world." However, he clarified that the automaker's European production plants have the "flexibility" to withstand the expected downturn, and Ford generally has "the liquidity to deal with it."

As proof of that sufficient liquidity, Ford on Wednesday repaid $1.5 billion in debt as part of a routine transaction. Morgan Keegan analyst Pete Hastings told the Detroit Free Press, "It means they paid with cash," rather than drawing on a credit line. Hastings noted, "In a normal credit market, this wouldn't even merit a mention. But it isn't, so we're trying to interpret every little move."

Despite Ford's apparently stable cash position, investors today seem to be erring on the side of caution. The stock is down about 4% this afternoon to trade at $4.37. Today's plunge extends the equity's slump beneath staunch resistance from its 10-week and 20-week moving averages.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

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Last updated: November 25, 2009: 01:48 AM

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