It can't get any worse for Ford Motor Company - or can it? The American automaker today announced a third quarter net loss of $129 million which is actually smaller than the same period a year ago when FoMoCo lost $390 million. However, the company also posted a third quarter pre-tax operating loss from continuing operations (excluding special items) of $2.7 billion, down from a $194 million profit a year ago.What's even more worrying is the fact that FoMoCo burnt $7.7 billion of its $26.6 billion cash reserves during the July - September period, or about $2.6 billion a month from an average of $1 billion a month over the prior 6 months. If Ford continues to burn its reserves at the same rate, it will be out of cash in about 7 months or until April 2009...
Ford disclosed steps to improve cash by as much as $17 billion through 2010. The actions that the company is planning to do include including a slash in annual capital spending to between $5 billion and $5.5 billion and further reductions of salaried personnel-related costs by an additional 10 percent by the end of January 2009 through layoffs, attrition and other actions.
The actions include:
- Reducing North American salaried personnel-related costs by an additional 10 percent by the end of January 2009, through personnel reductions, attrition and other actions. The reductions are in addition to personnel-related cost actions already taken in Ford North America and under way in Ford of Europe, Ford Asia Pacific and Africa, and Volvo.
- Further reduction of U.S. hourly employees by approximately 2,600 as a result of the most recent round of targeted buyouts – bringing Ford's total U.S. hourly reductions through buyouts in 2008 to approximately 7,000.
- Eliminating merit pay increases for North America salaried employees in 2009.
- Eliminating performance bonuses for global salaried employees, including the Annual Incentive Compensation Plan for the 2008 performance year.
- Suspending matching funds for U.S. salaried employees participating in Ford's Savings and Stock Investment Plan, effective Jan. 1, 2009.
- Reducing annual capital spending to between $5 billion and $5.5 billion – enabled by efficiencies in Ford's global product development system and reduced spending in declining product segments.
- Reducing engineering, manufacturing, IT and advertising costs through greater global efficiencies.
- Reducing inventories globally and achieving other working capital improvements.
- Return of capital from Ford Credit to Ford Motor Company consistent with Ford Credit's plan for a smaller balance sheet and a focus on core Ford brands.
- Continuing to develop incremental sources of Automotive funding, including divesting of non-core operations and assets, and implementing equity-for-debt swaps.
