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.
Reader Comments (Page 1 of 4)
10-02-2008 @ 3:56PM
jdunn said...
Now maybe the American car companies will
finally wake up and produce a competetive
product ? I haven't bought an American
car in 20 years, for the money, they're flat out
garbage.
10-02-2008 @ 4:02PM
Norman Prevatte said...
I watched this go on for years. Ford, GM, and many others followed the market trend for the gas guzzling vehicles. They were unable to "see the forest for the trees", and will lose big now.
Long ago, I only drove fords. My last was a 1995 F150 which remains the nicest, most comfortable vehicle I ever had. But, It only got 15 mpg. I had to get rid of it, and replaced it with a Nissan Frontier Pickup. My wife drives an 05 Xterra now. Evern with its large 4.0 V6, it gives 23 mpg hwy, and 17 mpg city. Not bad. My uncle had an 06 Ford Ranger with the essentially the same drive train. It only gave 15 mpg, and it was small than the Xterra!
They have to figure this out. Otherwise I will never have another Ford. Very sad.
10-02-2008 @ 4:08PM
Jaculis said...
Comparing some recent models, released as "quality" by Ford [like the Taurus], to other competitors, they have had ten times as many recalled failing parts, according to independent reviews. That "track record" over the last ten years makes people consider Ford's products as a less viable option in a tight economy as people hope to make better investments than the risky ones Wall Street typically has.
10-02-2008 @ 4:31PM
Sharon Stewart said...
As an owner of an auto repair shop, I must say we really like Ford. They keep us in business!
10-02-2008 @ 4:19PM
gwl said...
I bought my first American car in 21 years last year (2007Ford Mustang GT). I have not had any problems with it at all and it is as well put together as my 2006 Subaru. I can feel your apprehension at buying any vehicles from American manufacturers, given past history of reliability, but I would at least take a look and a drive the next time you buy a vehicle, jdunn. I am seriously considering a Chevrolet Malibu as my next lease after my lease on the Subaru is up. The Malibu is a nice-looking vehicle that has better looks than many of the new foreign vehicles. It gets pretty good gas mileage and a very nice interior comparable to the foreign makes. I used to be a Toyota buyer for many years but I don't like the designs they have come out within the last few years. As with all vehicles, make sure the dealership is known for their great service department, more so with American auto dealerships than Japanese auto dealerships.
10-02-2008 @ 4:18PM
eddie said...
Ford cars are pure junk and always have been
and the people know it. Ford should be closed
down for good for selling so much junk!
10-02-2008 @ 4:24PM
Obamas a liar said...
Dont count on the quality to improve in this economic time...
10-02-2008 @ 4:31PM
Joseph said...
I use to buy only Ford products. Lincolns, trucks, Merc wagons, many mustangs, Pantera, etc. My last was a 1990 pickup that at 13 months and 6,000 mi had the paint going bad, bad trans., and paint falling off the wheels. I called, they said it was "my problem". I or my family have never since or ever will again own a Ford product. Now it's "their problem". We only buy foreign brands now. (seven households)
10-02-2008 @ 11:13PM
Jerry Dean Scott said...
I drive a 1948 chevy pick up that gets good gas milage for what I need to use it for. When is need repairs I fix it and when it needs paint I paint it. It is the ugliest old brown thing in town and I love it as much as my dog, maybe more. My wife told me 25 years ago to get rid of it or she was leaving me. She's been gone now for 25 years and I don't miss her at all. I have a new woman now who gets good milage too, for what I need her for.
10-02-2008 @ 4:42PM
jak said...
help to destroy the US economy buy Japanese
10-02-2008 @ 9:51PM
Sam said...
I own a 2004 Ford Expedition the first new car I ever owned in 34 years of driving. The only reason I bought a Ford is because I have a family member that worked in a Ford dealer and I got a good break on it. I never like Fords. I'm an auto and truck mechanic and I think Fords have to be one of the worst and hardest vehicles to work on. My Expedition has only 34,000 miles on it. So far the battery went bad the drivers seat has fell apart 3 times, the underside of the car has way too much rust on it, the front differential was leaking oil the transmission cooler lines are about to start leaking from rust and the paint on the rear door is starting to blister because there is rust under the paint. No I don't drive through any salt water, I know what that can do to metal. The fuel milage is no where near what the sticker said it should be and no I don't speed, take off hard and never had the engine past 3500 rpm. My wife's 2001 Explorer has 55,000 miles on it and I had to replace all 4 ball joints. So I don't think I will ever buy another Ford or any other American made car for that matter and I always try to buy American when I can. The American car companys still got alot of catching up to do if they ever expect to turn a profit. I hope some suits at Ford, GM and Chrysler reads this and realizes the real reason thier cars don't sell. You can polish a turd but its still going to be a turd. Sambo311
10-02-2008 @ 4:53PM
Chris said...
I bought a Ford F150 Supercrew new in 2001 and it now has 200,000 miles on the odometer without a single mechanical failure. I get 20 MPG with the 4.6L V8 and while I'd like better mileage I feel the fit and finish is as good as any car I've owned in my 40 years of driving. Fit a hydrogen generator to the throttle body and I'd wager the truck could get 35 MPG or better.
10-02-2008 @ 5:08PM
willy said...
just read your all of your comments and it is so easy to see why this country is in the shape it is in.
10-02-2008 @ 8:58PM
Doug said...
Ford is making a car that gets 65 mpg but won't sell it in America. I will never again buy an American-made vehicle as long as they're doing stupid things like this.
10-02-2008 @ 5:18PM
John said...
Not sure what your complaining about. I have over 109k miles on my 2000 focus. Two sets of front brakes and one set of rear brakes during 8 years for an adult driven car isn't bad. Recently I had the trans pan dropped and the fluid and filter changed. Oil change every 3k miles and the car has been very good, even in Chicago winters. I also have a Ford 350 for hauling stuff.
Perhaps japanese cars will take more abuse, but if you care for your Ford, it'll get you where you are going.
I work as an engineer for an American Corporation (not Ford) and I buy American made products.
I am a Ford shareholder and have been buying it's stock as I think at it's currently level it's a great deal.
10-02-2008 @ 5:20PM
Charles Clark said...
Ford is in trouble because it does not make cars that people want to buy. That alone is Ford's problem, not the economy. Ford could easily increase its sales by 400% per month if it would only start making cars people want to buy. We want Ford to go bankrupt as punishment for not making cars people want to buy.
10-02-2008 @ 5:33PM
teltech54 said...
Hate to tell this FORD guy but the economy isn't going to turn around until 2011 or 2012. By then he is going to be having his going out of business sale.
10-02-2008 @ 5:32PM
Blondie said...
Look at the trucks from 'yesteryear'. They got way better mpg's than todays trucks. So much for the new being better. Tell me the government had nothing to do with this...
10-02-2008 @ 5:44PM
buzzer said...
I have no sympathy for Ford or any of the other American car makers! They have had 35 years to change and produce cars that could compete with the world market. They make an overpriced product that lacks the quality of Japan, Korea or Germany! And just think, they once ruled the roads! If they cannot keep up, then they must go out of business!
10-02-2008 @ 5:48PM
harold petersen said...
i own a 1998 ford escort zx2 with 95,000 miles.never had a problem with it.running great and get 32 mpg hwy.