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Old 03-07-2003, 07:19   #1 (permalink)
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Ford fights back after bankruptcy forecast

Daily Telegraph
By Simon English in New York (Filed: 07/03/2003)

Ford is fighting gloomy predictions that it could be forced into bankruptcy, weighed down by debts of $150 billion (£94 billion), stumbling sales and a sluggish world economy.

A scathing examination of the motor icon's balance sheet by the analyst famed for predicting that WorldCom and Enron would go bust long before Wall Street realised those companies were doomed puts Ford's future in doubt.

Sean Egan, founder of the Egan-Jones ratings agency, offers eight reasons why Ford could be in serious trouble including huge pension fund liabilities and a lack of cash to fund borrowings.

"If it didn't have the name Ford, it would be in bankruptcy right now," says Mr Egan.

Ford's shareholder equity of $11 billion would be wiped out completely if an adjustment was made for the pension fund liability, even before another $10 billion in healthcare costs for retired workers is included, he argues.

He believes Ford's survival is dependent on investors remaining supportive. The shares slipped 31 cents to $7.45 yesterday, close to an all-time low.

Mainstream rating agencies Moody's and Standard & Poor's rate Ford's debt at a little above junk level, though these firms rely for income on issuers of debt. Ford is the largest debt issuer in the US.

This week, the market treated Ford's bonds as if they were junk in any case, quoting them in dollars, a convention normally reserved for speculative investments.

Other concerns for Ford include the amount it has to repay by the end of the year - $18 billion, rising to $26 billion in 2004 according to Mr Egan - and the slim chance of a bail-out from the government should the worst occur.

No Wall Street firm contacted yesterday would come forward to defend Ford - analysts were "in meetings" or "very busy".

The last note from JP Morgan rates the shares a sell. Morgan Stanley says in a recent note to clients that "cost problems may not be abating", "cash flow is likely to be difficult this year", and "it remains unclear how the company expects to gain market share".

Ford lost $5.5 billion in 2001 after a disastrous year that saw Jacques Nasser ousted as the chief executive.

He was replaced by family scion Bill Ford, who has been praised as hard working and claims to "bleed Ford blue" but whose turnaround plan has yet to inspire recovery.

Last year he said America had fallen out of the love with the car, as a once mighty industry battled huge losses and fierce competition.

For all the difficulties faced by carmakers, rivals such as General Motors remain profitable. Ford lost another $980m in 2002 despite drastic cost cutting compared with $1.7 billion earned by GM.

A spokesman said: "Ford is fundamentally strong and we continue to improve our business performance. Our corporate revitalisation plan is gaining momentum on every front. As we prepare to celebrate our 100-year anniversary we are confident in our outlook for a successful future."

Ford insists its pension liability is "manageable".

A bankruptcy filing would add to the stream of business failures that have plagued corporate America and be a disaster for the company's hometown of Detroit, staff across the world and the Ford family that still owns a controlling stake.

Grant's Interest Rate Observer, a Wall Street newsletter, said that a crisis at Ford would "nudge Saddam Hussein off the front page".

Ford's brands include Jaguar, Aston Martin and Volvo.

(Photo)Bill Ford: praised as hard working but his turnaround plan for the group has yet to inspire recovery
Attached Images
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Old 03-08-2003, 06:25   #2 (permalink)
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Ford's long-term debt rating is affirmed by Standard & Poor's

Saturday, March 8, 2003
By Bill Koenig / Bloomberg News

NEW YORK -- Ford Motor Co.'s credit ratings were affirmed by Standard & Poor's following speculation it would downgrade the world's second-largest automaker, the ratings company said.

The decision to maintain a long-term debt rating of BBB was "predicated on substantial improvement in financial performance from recent poor levels," S&P said in a statement. Ford's short- term rating of A-2 also was affirmed.

"S&P's announcement reflects the recognition that Ford is improving its performance," Ford spokeswoman Marcey Evans said. The company is expected to meet its 2003 financial targets and restructuring goals, she said.

S&P downgraded Ford in October after expressing doubts that Chief Executive Officer William Clay Ford Jr.'s restructuring plan would restore profit. Ford had a net loss of $980 million last year, after losing $5.45 billion in 2001.

Bill Ford announced in January 2002 that he would close plants, cut jobs and introduce new models to generate $7 billion annually in pretax profit by 2005. Ford has said it will have earnings of 70 cents a share this year.

The ratings action affects Ford's $168 billion in debt and preferred securities outstanding, S&P said. S&P also affirmed its BBB rating of Ford Motor Credit Co., the automaker's consumer- finance unit. The outlook for Ford and Ford Credit is negative, meaning their ratings may be lowered later.

S&P said the automaker's target of breaking even in its automotive operations this year "is an important benchmark," and it may downgrade Ford if the goal isn't met. That would make it more expensive for the automaker to raise funds.

Shares of Dearborn, Michigan-based Ford fell 10 cents to $7.35 at 12:33 p.m. in New York Stock Exchange composite trading.
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Old 03-08-2003, 06:31   #3 (permalink)
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Ford says finances sound despite report to contrary

By Associated Press

DETROIT -- Ford Motor Co. said Friday its finances are sound and its revitalization plan on track despite an analyst report that the world's No. 2 automaker could be forced into bankruptcy.

In a recent edition of Grant's Interest Rate Observer, Sean Egan of the independent credit rating agency Egan-Jones offered eight reasons why a bankruptcy filing was a possibility for Ford, including multibillion-dollar pension fund liabilities and other obligations.

A London newspaper reported a similar story Friday.

"If it didn't have the name Ford, it would be in bankruptcy right now," Egan told Grant's.

Ford spokeswoman Marcey Evans said Friday that Egan's analysis was "seriously flawed" and that Ford is "fundamentally strong."

Evans said Ford has $25 billion in cash, has gained market share of late in the United States and continues to reduce costs. On the automotive side, she said, the company's debt payments amount to $1 billion in the next five years.

Ford, which is more than one year into a five-year revitalization program, has continually said its pension obligations are manageable.

In response to market rumors that a downgrade may be forthcoming, Standard & Poor's on Friday affirmed its long-term and short-term credit ratings on Ford, its finance arm and other related entities. Its rating on Ford is near the bottom of the investment-grade scale.

Moody's on Friday also affirmed its ratings for Ford, saying the automaker appears to be making progress in its turnaround, though Moody's maintained a negative ratings outlook.

In trading Friday on the New York Stock Exchange, Ford shares were off 23 cents, or 3 percent, to close at $7.22.
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Old 03-11-2003, 08:46   #4 (permalink)
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Ford Tough
Jerry Flint, 03.10.03, 6:15 PM ET

Is Ford going bankrupt?

The story was reported this past Friday in the Daily Telegraph of London. Understand, London newspapers have been having trouble keeping readers interested since Diana died and Fergie started wearing tops.

So let's cut to the chase.

Ford Motor (nyse: F - news - people ) is not going bankrupt now or in the near future. While nothing is impossible, I rank the chance as something less than the possibility that aliens from outer space--all resembling Pamela Anderson--will land from rocket ships to seize Earth, and that Saddam Hussein will win his war against the U.S. in a mano-a-mano arm-wrestling contest with President George W. Bush.

In reporting on the ups and downs of the auto industry over 50 years, I have a few ironclad rules. And while I do not sell investment advice, one rule has been to buy General Motors (nyse: GM - news - people ) at $30, DaimlerChrysler (nyse: DCX - news - people ) at $10 and Ford at $6 (meaning anything under $7). This isn't buy and hold forever. This is buy and sell when you have a good profit.

The rumors about a bankrupt Ford apparently started with a Feb. 28 piece in Grant's Interest Rate Observer, quoting Sean Egan, founder of one of the smaller credit-rating agencies, Egan-Jones. The Daily Telegraph's New York-based writer picked it up and ran with it last Friday.

The stories focus on the problems in Ford's auto business and Ford's huge debt.

First, the business: No one has been more critical of Ford's product programs than I have. No one. If you read Forbes.com, you know that. Ford has been slipping. There isn't enough new product. Management has seemed uncertain about what to do with Ford, Mercury and Lincoln cars. General Motors has grabbed the lead in truck (SUV) sales from Ford.

There are problems for Ford in Canada, Brazil and Western Europe as well. But none of these problems is beyond solution. The biggest question is whether the leadership is up to the job. Chairman William Clay Ford Jr. fired the previous chief executive, Jacques Nasser, and just in time. The new leaders are competent, but they aren't inspirational like Lee Iacocca or Robert Lutz. Fair enough.

The bigger issue is the market today. Sales are falling; the economy is sluggish; the stock market is sinking; we're about to march on Baghdad; and gasoline prices are pushing past $2 per gallon. None of that is good for the auto business.

Sales have run to 17 million units in recent years. But, remember, the Gulf War aftermath sank them down to 12.5 million a decade ago. If they go that low, everyone would be in trouble--but that doesn't mean bankrupt. My best guess: Sales will drop a bit from last year and end up closer to 16 million, rather than 17 million.

What the doomsayers forget is that although Ford has problems, it has strengths, too.

Its dealers in America are the best in the business. As in the past, they can carry the company when product slips.

Ford has the world's best-selling sport utility vehicle in the Explorer, the best-selling small pickup in the Ranger and the best-selling big truck group in the F-Series. Ford is within a couple of hundred units short of having the best-selling small SUV (the Escape); plus, it has the best-selling sporty car (Mustang) and the best-selling rear-wheel-drive sedans (Mercury Grand Marquis and Ford Crown Victoria). The European business seems to be recovering, too.

For new products, the big F-Series pickup comes out this year; Ford could sell 1 million per year when all the truck plants are rolling. A success here would go a long way to turning around Ford's image.

In the pipeline: a sexy new Mustang, a large sedan called the 500 and an all-wheel-drive sports wagon.

It's not enough new stuff, but it's a start.

The other issue in the bankruptcy nonsense is Ford's debt. The Telegraph put it at $150 billion. That lumps together a lot of unlumpable things. The largest amount is the debt of the Ford credit arm, which finances the cars and trucks Ford sells. Those loans are backed by people paying off car loans. That isn't a problem.

Another big chunk is the pension debt. This debt isn't fully funded ($7 billion underfunded in the U.S.), but it's due over decades. Saying a company can go bankrupt over this debt is like saying, "The social security fund will run out in 2025, so let's all move to Canada now."

Ford says it has $25 billion in cash and, after debts, $11 billion in net cash for its automotive business. The company says the pension debt is manageable. It looks manageable to me, and I've been reporting on this stuff for half a century.

I'm not saying that the pension and future health care costs aren't a problem. A $7 billion obligation isn't a joke. Over the years, either profits or some assets have to be pushed into the fund. That's what General Motors is doing right now to beef up its fund. Of course, it would help if the stock market turned around.

Companies just don't go bankrupt because of underfunded pension funds. What counts is if the company is successfully selling its product and making money. If it is, the pension problems get solved.

Detroit automakers--Ford and GM--are old-economy companies. They aren't Enron or WorldCom, and they don't exist in smoke and dreams. The car companies own factories that make real products. The accounting isn't aimed at pushing up the stock to trick investors. I'm talking about honest companies run by honest men. Yes, they make mistakes. But when they do screw up, they--and you, dear reader--hear it from me.

Look at General Motors, which was in worse shape than Ford and has been turning around its U.S. business. The same thing will happen to Ford.
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Old 03-13-2003, 06:19   #5 (permalink)
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Analyst downplays Ford's woes
Critic dismisses suggestion of possible bankruptcy

March 13, 2003
BY JAMIE BUTTERS
DETROIT FREE PRESS BUSINESS WRITER

A Wall Street critic of Ford Motor Co.'s turnaround plan says the Dearborn automaker's stock has fallen far enough amid "simply unrealistic" bankruptcy fears.

With Ford shares near the $6.50 price he sees as fair, analyst Saul Rubin of UBS Warburg upgraded his rating on the stock Wednesday from "reduce" to "neutral" -- in effect, advising investors to hold onto Ford shares rather than sell or buy them.

Ford shares gained 48 cents, or 7.3 percent, to close at $7.08 Wednesday.

Small credit-rating agency Egan-Jones Ratings Co. has said Ford could be pushed into bankruptcy by the huge debts of its credit company and the ballooning shortfall in pension and retiree health-care accounts.

But Rubin dismisses these arguments. Ford Credit's debt is balanced by loans it makes to Ford customers, so at worst those wash each other out, he said.

Excluding the banking business, Ford's debt at the start of the year was $19 billion -- less than Ford's $25 billion in cash. And very little of that debt is due in the next 10 years, Rubin said.

"Even when assuming a hefty annual cash burn -- and we do -- on top of fairly significant pension fund contributions -- and, again, we do -- Ford would still have at least four to five years or so in our opinion" before it could face a cash crunch.

Even then, it has many assets that could be sold.

Ford executives say Egan-Jones is willfully misinterpreting the relationship between Ford's automaking and financing units.

Managing director Sean Egan said he has "encouraged them to send us information," as long as it is available to all investors.

"That is absolutely not true," said Bibiana Boerio, director of finance and strategy for Ford's international operation. "He has chosen not to utilize that information."

Egan's report, along with a continuing stream of other bad news, pushed Ford stock to almost a 10-year low Tuesday before rebounding Wednesday. Concerns include: a possible credit-rating downgrade by Standard & Poor's Corp., no guidance for second quarter production and the flap over chief operating officer Nick Scheele's order, later rescinded, to award all advertising business to one company.

Rubin says he continues to believe Ford is the weakest automaker in the crucial North American market, and he questions whether results in Europe would grow as much as most investors hope. "In short, we are no more positive on Ford today than we have been for quite some time."
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Old 03-14-2003, 07:39   #6 (permalink)
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Most analysts give Ford a fighting chance

Source: just-auto.com editorial team


Without "a material change" in the industry's business model, General Motors and Ford face a crisis that "will involve restructuring, consolidation, or possibly even mergers with other partners," John Casesa, an auto analyst at Merrill Lynch, told the New York Times (NYT) in an interview.

In a Friday article looking at the financial state of Ford and GM, the NYT noted that Gary Lapidus of Goldman, Sachs wrote in a recent report entitled "Motown Breakdown" that "the status quo may be untenable." Sean Egan, an analyst at the independent credit rating agency Egan-Jones, was even more pointed recently, saying Ford would be bankrupt if not for its blue- chip brand name, the paper added, noting that these are lean times for the Big Three, though Chrysler at least has its German parent, DaimlerChrysler, to lean on.

The NYT said the latest sign of economic trouble came from Ford, which said on Friday that it would cut second-quarter production 17 percent. War worries appear to be halting years of booming North American sales.

"It's pretty clear that consumer confidence has slipped," George Pipas, Ford's top sales analyst, told the New York Times. "It may be an equal measure of concerns about geopolitical instability, prospects for conflict, and there hasn't been much good news as it relates to jobs."

The newspaper said that rising petrol prices – CBS News this week reported a San Diego outlet selling premium for close to $US4 a gallon – are also wearing on a pivotal Detroit profit centre, big SUV's. Making matters worse, after a year and a half, an incentive war led by GM appears to have lost its effectiveness, while many customers now take zero percent financing for granted, the NYT added.

The NYT said Ford looks weakest right now with a bloated cost structure is bloated and its bonds trading as if they had junk ratings. The company, which celebrates its centennial in June, has lost $6.4 billion in the last two years.

The NYT also commented on “continuing turmoil in the corner offices” at Ford saying that the management team, assembled by William Clay Ford, Jr., the chairman and chief executive for nearly a year and a half, has yet to coalesce. Nicholas Scheele, Ford's president and chief operating officer, sent a memo Wednesday to company officers that tried to squelch rumors of a rift with David Thursfield, another top executive, the NYT noted, also mentioning that Ford is currently looking for its sixth chief financial officer in four years while Allan Gilmour, retired until last year, fills in.

Though Egan told Grant's Interest Rate Observer in an article last month, "if it didn't have the name Ford, it would be in bankruptcy", the NYT said that Ford does have the name Ford, and almost all other analysts dismiss talk of bankruptcy. The paper said that Ford stock got a boost Wednesday when Saul Rubin, a UBS Warburg analyst and a noted bear on Ford, upgraded the stock from "reduce-2" to "neutral-2," in effect telling investors that Ford may be bad, but not that bad.

"While long-term prospects look poor indeed, we believe that Ford simply does not have the balance sheet weakness to support any notion of imminent bankruptcy risk," Rubin wrote in his report, according to the New York Times, adding that while it was "a poor equity investment" it was also fairly cheap.

But others were more pessimistic, the paper said.

"The reality is that Ford is very bad," Maryann Keller, a longtime motor industry analyst, told the NYT, adding that the company's troubles are a holdover from the brief, but destructive, reign of Jacques Nasser, who was ousted by Bill Ford in October 2001.

Keller told the NYT that Nasser "squandered billions", laid off the company's older managers and let product plans stagnate.

In recent decades, she added, according to the NYT, Ford got by because it "was a little better than GM" by such measures as quality and manufacturing efficiency, and pressures on the Big Three "were largely inflicted on General Motors."

"But now, by most statistical measures, GM is better than Ford," Keller told the New York Times. "And the world's largest auto company doesn't need to be better than Honda or Toyota, just Ford."

With a potential war looming, things could get worse, the newspaper said. "They were not making money over the last two years when auto sales were good," Egan told the NYT in an interview. "So what will it look like over the next two years?"

According to the NYT, Egan also sees a company with total debt load of $166 billion last year versus $11.2 billion in shareholders' equity. But David Brandi, Ford's director of long-term financing, argued against combining Ford's automotive debt with Ford Credit's huge portfolio of car loans, the NYT said.

"You have two very different kinds of businesses," Brandi told the NYT, "and there is an appropriate leverage for each."

According to the New York Times, most analysts see Ford's borrowing situation as ugly but under control. And there is a debate on whether GM really is in much better financial shape than Ford.

"Ford is highly liquid and it has lots of assets to sell," Casesa of Merrill told the paper. "I'm in the camp that sees the restructuring plan as credible and achievable and exactly what the company needs, but it will take time to create results."

"I think it's the most vulnerable in the market right now, but from a balance sheet standpoint Ford may have more staying power than GM, primarily because Ford has a much larger net cash position and a much lower pension liability," Casesa added, according to the NYT.

The New York Times said that part of GM's problem is that it is the remnant of a much larger company and now supports two and a half retirees per worker in North America, compared with a one-for-one situation at Ford.

Lapidus of Goldman, Sachs told the paper that "the conventional view would be that Ford operations are not performing as well," but he added that Ford's "balance sheet, at least in the short run, is in better shape. There are fewer short-term calls on their cash and they have more of it," he said, according to the New York Times.
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Old 03-14-2003, 07:56   #7 (permalink)
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Ford's finances under scrutiny
By Theo Leggett
BBC World Service business reporter

Rumours of financial difficulties and disputes between top executives are plaguing the Ford Motor Company as the firm's board reconvenes for the second half of a mammoth two-day meeting.
Earlier this week shares in the world's second largest carmaker fell to their lowest level in eleven years.

Falling car sales in the United States and growing doubts that it can meet its financial targets in a weakening economy now seem to be the least of Ford's problems.

Last week saw a sensational warning by the influential credit ratings analyst Sean Egan that the company was close to bankruptcy.

Too pessimistic?

Mr Egan told the BBC he believes Ford's debts may be getting out of control.

"They have approximately $11bn (£6.9bn) of shareholders equity as of the end of December and their debt is approximately $165bn so you don't have very much cushion," he said.

"But it gets worse in the sense that the unfunded pension liability is approximately $15bn, so if you're to make the adjustment in fact it would wipe out all that shareholders equity."

"The argument is made that you don't have to make the adjustment right away but that's assuming that the equity markets are going to go up substantially."

Mr Egan has a reputation as a particularly outspoken analyst, and claims to have drawn attention to financial problems at the fallen corporate giants Enron and WorldCom well before they became common knowledge.

Nevertheless not everyone agrees with his assessment. One UBS analyst actually raised his own rating on Ford on Wednesday, claiming that the market was being unduly pessimistic about the Blue Oval's prospects.

Difficulties 'overstated'

Karl Ludvigsen is a former vice president at Ford of Europe and now works for Euromotor Con******ts. He believes Ford's problems have been exaggerated.

"About $125bn of that debt is its financing business and of course that's a part of the business that's accustomed to rolling over debt and has ample access to sources of funding," he said.

"So if you hive that off, yes the unfunded pension aspect is a concern at Ford - it is for all the car companies - but again that's kind of rolling forward.

"The automotive business has $25bn in cash and its got $19bn in debt so the core car business doesn't look too vulnerable."

But Ford's difficulties are not just financial.

Analysts believe there is a growing rift between the president and chief operating officer, Sir Nick Scheele, and his likely successor, the executive vice president David Thursfield.

Such rumours gained ground this week when the company publicly overturned Sir Nick's decision to award all it's advertising work to one agency, WPP - a firm run by a personal friend of his.

Sir Nick has dismissed the rumours as scurrilous but with the markets already nervous of Ford's prospects, they are unlikely to help his credibility, or the company's share price.
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Old 03-17-2003, 07:26   #8 (permalink)
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MARCH 17, 2003
BusinessWeek Online
STREET WISE
By Kathleen Kerwin
Kerwin covers Ford as Detroit bureau chief for BusinessWeek
Edited by Douglas Harbrecht

Ford Rides the Low Road

Even if its stock is bouncing on the bottom, the chances of it climbing again soon are pretty slim. Bankruptcy, however, is even more unlikely

How much further can Ford Motor's stock sink? Just as shares started recovering from 11-year lows of $6.58 on Mar. 11, more bad news hit -- this time a 17% cut in Ford's second-quarter production plans. The announcement dragged the blue chip back down again on Mar. 14, when it closed at $6.76.

Most Wall Street analysts dismiss the rumors of bankruptcy that swirled earlier in the week and predict that Ford (F ) has probably bottomed out. Investors with a long-term horizon might find the shares worth taking a chance on at this price, but don't expect a rebound any time soon.

The auto maker's debt leverage and pension shortfalls are alarmingly high, and it has yet to prove that better cars and trucks are on the way. Facing an uncertain economic outlook and a host of operational and financial difficulties, its shares could bump along at their current depressed levels for quite a while.

TOO GLOOMY? Chalk up Ford's troubles so far this year to investors' war jitters and uncertainty about the economy. (The stock was trading as high as $12 in December.) Amid all the gloom, investors zeroed in on Ford as one of the weakest of the manufacturing giants. A temporary ray of light appeared the week of Mar. 10, when UBS Warburg analyst Saul Rubin upgraded Ford stock from reduce to neutral, saying the market's outlook on the company's near-term prospects had become "unduly pessimistic." He added that "the sentiment pendulum swung too far too fast" and said Ford shares have gone as low as he expected them to go.

Still, the stock took another jolt when Ford announced late on Mar. 13 that it will cut second-quarter production to 980,000 cars and trucks. Analysts at Merrill Lynch and Bear Stearns promptly lowered their earnings forecasts, figuring decreased output would translate into diminished sales and profits in the second quarter. Although Merrill analyst John Casesa said Ford stock is now near its bottom, he also wrote: "We believe that deterioration in industry fundamentals, Ford's operations issues, and balance-sheet pressures will prevent the stock's multiple from expanding."

Ford Chief Executive William Ford Jr. has promised Wall Street that his company will eke out a small profit this year. In 2002, Ford lost $980 million on sales of $163 billion, compared with 2001's $5.45 billion loss on $161 billion in revenues. But Ford's 2003 forecast is based on a series of rosy assumptions: healthy industry sales, flat pricing, and steady market share for Ford. If a war with Iraq and its aftermath lead the economy from stagnation into recession, as many now fear, the carmaker will likely miss its 2003 targets.

IN THE DUMPS. To counter rumors of an impending credit downgrade, S&P recently affirmed its ratings on Ford and Ford Credit at BBB -- two notches above junk status. But ratings agencies are likely to revisit those results if the economy, and Ford profits, weaken further. Goldman Sachs analyst Gary Lapidus forecasts that Ford's auto operations will lose $850 million this year, "which is below S&P's stated breakeven benchmark necessary to avoid a 'reassessment' of Ford's credit rating." Lapidus anticipates a one-notch S&P downgrade of Ford debt to BBB- by summer.

Ford's bonds already trade at junk prices. And the carmaker's high debt levels contribute to market jitters. Sean Egan, a managing director of credit research firm Egan-Jones, takes a dim view of Ford's leverage: $162 billion billion in debt vs. $5.6 billion in shareholder equity, as of December 31, 2002. The Wynnewood (Pa.) firm has been predicting since last year that Ford will be forced into bankruptcy.

Still, such fears appear to be overblown. Ford's cash position is $25 billion and growing, and its net automotive cash hoard (excluding its Ford Credit business and debt) stood at a healthy $11 billion at the end of 2002. Most of the $148 billion owed by Ford Credit and the company's other financial operations is backed by auto receivables. And the average maturity of Ford's $14 billion of corporate debt is measured in decades, with little of it due to be repaid in the next few years.

REBATES LOSE STEAM. Ford's U.S. pension shortfall at the end of 2002 hit a worrisome $7.3 billion. The company argues that this obligation remains manageable. It kicked in a $500 million voluntary contribution in January. Ford faces no mandatory pension contributions until 2007. But declining stock prices continue to erode the fund. Soaring health-care obligations are another worry. Ford expects its retiree health-care and life insurance costs to rise 14% this year, to $2.5 billion.

Actually, the whole auto sector faces tough going. Concerns about auto stocks ratcheted into high gear when the final tally of February sales showed growing industrywide weakness. North American sales for the month fell 7%, running at a tepid seasonally adjusted annual rate of 15.4 million, vs. a year-earlier 16.6 million pace. Bad weather across the nation was blamed for some of the weakness, but analysts worry that larger economic forces are at work and that auto sales could continue to deteriorate. Word so far is that March sales remain lackluster.

Ford's February sales were actually flat -- good news compared with rival General Motors' (GM ) decline of 19%. But a closer look revealed that Ford's recent strength came mainly from low-profit Taurus sedans to commercial and daily-rental fleets. More alarming for Detroit is the dawning realization that customer incentives such as cash rebates and no-interest loans seem to be losing their drawing power as the novelty wears off.

If bigger givebacks are needed to spur new demand, GM, as a low-cost producer, can best afford to keep rolling out big incentives. But playing catch-up wreaks havoc on Ford's already shaky bottom line. And that, in turn, is likely to keep Wall Street edgy about the carmaker's stock prospects. It may be in the bargain-basement bin for some time.
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Stacy94PGT
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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