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Ford burns cash, unemployment soars

Today's Financial News - Posted November 7, 2008

Wall Street was forced to ingest some wicked economic reports this morning. Fortunately, the markets were able to climb out of the gate. Did the news from Ford (NYSE:F) help?

By Andrew Snyder, TodaysFinacialNews.com

Baltimore – (TFN): After a string of the worst days on Wall Street in over two decades, investors are forced to swallow some more horrific economic news today. The data proves we have a rough road ahead.

First, the nation’s employment data was drastically weaker than most analysts had predicted. Not only did the Labor Department show that 240,000 jobs were eliminated in October, it also revised its September figure to 284,000 and August’s numbers to 127,000. As of today, 6.5% of the nation is unemployed and actively searching for a job.

That means in just one report, we learned there were 179,000 more job cuts than we had previously estimated. That kind of information is not going to do anything to help consumers start spending again and get the economy on track. With nearly a million jobs lost in the last three months, there is far less money to go around.

Driving off a cliff

As if soaring unemployment figures are not enough to spook investors, Ford (NYSE:F) announced its latest quarterly losses. After burning more than $7.7 billion in cash over the past three months, the automaker lost $129 million. On a pretax basis, it lost a much more alarming $2.9 billion.

To help alleviate some of the cash burn and quarterly losses, Ford is doing its best to trim all the fat it can find. First, it is eliminating more than 2,200 white-collar jobs or about 10% of its current staff.

Ford is also cutting its production by another 40,000 units. That is down from the 170,000-unit slowdown it already had in store for the fourth quarter.

Even with the dire figures, Ford is the best positioned of the Big Three. With $18.9 billion left in its cash coffer, it has enough liquidity to see its operations through to at least mid-2010.

That figure is calculated using today’s dire economic environment. If the situation improves, which is widely expected between now and then, Ford’s cash position will carry the company even longer.

Fortunately, cars wear out and need replacing. That means an industry turnaround is inevitable. Most analysts expect it will come by 2010. As long as Ford can hang on until then, its long-term sustainability should be just fine.

As for General Motors (NYSE:GM), we will just have to see what its figures look like later today. Stay tuned as the report should be interesting.


Next Article: General Motors posts an unprecedented loss

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Posted by Andrew Snyder · Filed Under US Stocks and Markets 

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