Ford's bottom line: About 13 billion

Alright, so I am not the brightest bulb in the box sometimes, especially when it comes to seemingly smoke and mirrors that some times seem to come about every now and then. But Ford had several different situations in their 33 page document which discussed potential outcomes based on variable factors; it was kind of like one of those old "create your own adventure" books. Anyways, I found this on autosavant and thought it spelled things out very well:

In the business plan document, Ford laid out three different industry sales scenarios - basically bad, worse, and worst - and what its government assistance needs would be under each scenario.

Industry Sales at “Slightly Improved Rates”
2009: 12.5 million
2010: 14.5 million
2011: 15.5 million

Ford’s assumptions of not needing to access the credit line that it’s asking for are based on the assumption that industry sales will slightly improve over their current pattern, based on historical precedent set by the time it took for the economy to recover from the early 1980s recession (peak to trough GDP decline of 2 to 2.5%. Ford estimates that it would need access to a $6 billion credit line in the above scenario, to only be drawn down if necessary.

Industry Sales at “Current Rates”
2009: 11.0 million
2010: 12.5 million
2011: 14.0 million

If the current recession turns out to be worse than the early 1980s recession - either deeper or longer term - Ford projects industry sales as shown in the “current rates” model. Under this scenario, Ford sees a 3% peak to trough GDP decline, and that the median age of cars on the road would increase to over 10 years (from 8 years earlier in this decade) as consumers stop replacing older cars. Ford would need up to $9 billion to sustain itself through the above scenario.

Industry Sales at “Worse Rates”
2009: 10.5 million
2010: 11.0 million
2011: 12.0 million

If indeed this economic downturn is the worst one since the Great Depression (a scenario that seems, unfortunately, to be increasingly likely), would reduce industry sales volumes by over 9 million units from historical levels over a three year period. In that scenario, Ford projects that it would need up to $13 billion in assistance to survive.
In its business plan document, Ford also laid out the steps that it has taken to restructure its business in the past several years prior to the genesis of the current economic crisis. These included shuttering plants, eliminating the dividend, white collar job eliminations (including several corporate vice presidents), eliminating the 401(k) match, and other austerity measures.

Finally, Ford made the case for assistance for the industry as a whole because even though in a vacuum, Ford could survive some pretty bad news thanks to its available cash and credit, the interdependence within the industry among suppliers (GM, Ford, and Chrysler have an 80% overlap in supplier networks, and nearly 25% of Ford’s top dealers also own GM and Chrysler franchises) means that if GM or Chrysler goes belly-up, the sudden lack of demand for parts from the shared supplier network would cause a chain reaction of supplier bankruptcies, which would threaten Ford’s production - not to mention the health of its dealer body.

Actually, while Ford seems to be the one who is assuming that the worst case scenario is basically where they are at now and are asking for the most money, I actually think that their request and explanation is much better spelled out in terms of need and also repayment/restructuring than the other two. Just my opinion.

( Add your comments )

Recent Entries:
· Honda Announces Mileage Marathon Winner
· Cadillac Converj is GM's next electric car
· Could DeLorean save the Pontiac Solstice?

[ READER COMMENTS ]

Ford's bottom line: About 13 billion

Add your comments...

We kindly ask that you keep your comments relevant to this blog entry. Abusive or inappropriate comments or comments that are specifically promotional in nature may be removed.