Ford's bond cost adds $600 to car price, Lehman says - Ford Forums - Mustang Forum, Ford Trucks, Ford Focus and Ford Cars
LinkBack Thread Tools Display Modes
post #1 of 1 (permalink) Old 10-10-02, 10:59 PM Thread Starter
Registered User
Stacy94PGT's Avatar
Join Date: Feb 2001
Location: The Hills of North Georgia,USA
Posts: 7,859
Ford's bond cost adds $600 to car price, Lehman says

October 11, 2002

Dearborn, Mich. -- Ford Motor Co. has almost a $600 per model cost disadvantage to rival General Motors Corp. because of higher borrowing costs and that gap may widen next year, a Lehman Brothers Holdings Inc. analyst said.

Ford Motor Credit Co.'s average borrowing costs were 90 basis points higher than General Motors' in the second quarter, and 100 basis points equals about $600 in additional costs per vehicle for Ford, Lehman analyst Darren Kimball wrote in a report. A basis point is 0.01 of a percentage point.

"Fears about a liquidity crunch in Ford's credit subsidiary are taking on a life of their own," Kimball, who rates the shares "underweight/negative," wrote. "In our opinion, these fears are not legitimate, as we do not foresee a liquidity crisis for Ford Credit."

Ford last year lost $5.45 billion and in January said it will cut costs, close plants and create new models to generate a pretax profit of $7 billion annually by 2005. In May, Ford tripled the number of engineers to 1,000 assigned to cut as much as $700 in annual costs per vehicle by 2005.

"Our debt levels are very manageable," said Dan Jarvis, a spokesman for Ford's consumer-credit unit. "Stock prices and bond spreads are not an accurate perception of our business."

Ford is the biggest contributor to the Lehman Credit Index, a benchmark for many bond fund managers, and has about $127 billion in bonds, according to Bloomberg data. The automaker's finance arm is responsible for three of the 10 biggest debt sales ever in the U.S. corporate bond market.

Ford's 7.25 percent coupon notes maturing in 2011 were little changed at about 86 cents on the dollar. The yield was 9.6 percent, a 601-point premium to Treasury yields. That's more than double the yield spread three months ago.

Ford's costs may rise 50 to 75 basis points next year, Kimball wrote. The analyst couldn't immediately be reached for additional comment.

General Motors' 6 7/8 percent coupon bonds due in 2012 are trading at about 89 cents on the dollar, yielding 8.55 percent for a spread of 490 basis points. GMAC sold the debt in late August at a spread of 265 basis points.

Ford's shares have lost 51 percent of their value this year and this week hit their lowest price in a decade. Ford rose 45 cents to $7.60 at 4:01 p.m. in New York Stock Exchange composite trading.

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.....
Stacy94PGT is offline  
Sponsored Links

  Ford Forums - Mustang Forum, Ford Trucks, Ford Focus and Ford Cars > Fordforums Community > Latest Ford News and Racing News > Ford Worldwide News
Gear in this thread - Powered by O'Reilly Auto Parts

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page
Display Modes
Linear Mode Linear Mode

Similar Threads
Thread Thread Starter Forum Replies Last Post
TALK FROM THE TOP: Ford's Padilla laments 'souped-up' incentives Stacy94PGT Ford Worldwide News 0 05-19-03 08:16 AM
A CENTURY OF VISION: Fords built city, changed the world Stacy94PGT Ford Worldwide News 0 03-12-03 08:17 AM
Ford's 100th is big party Stacy94PGT Ford Worldwide News 1 03-09-03 09:16 AM
Three Ford Motor Company Vehicles Featured In James Bond Film 'Die Another Day' Make Stacy94PGT Ford Worldwide News 0 11-04-02 08:49 AM
British Show Spotlights Performance, James Bond Stacy94PGT Ford Worldwide News 1 10-22-02 02:19 PM

Posting Rules  
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On

For the best viewing experience please update your browser to Google Chrome