US: All eyes on Ford cash burn
Analysts and investors expect Ford to announce a large fourth quarter loss later on Thursday (29 January) and are expected to closely scrutinise its cash burn and near-term prospects.
Analysts on average expect a last quarter loss of US$1.22 per share before one-off items, according to Reuters Estimates, equivalent to a loss of more than US$2.8bn.
Ford posted an operating loss, excluding special items of $2.7bn, down from a $194m profit a year previously, for the third quarter of 2008. The net loss was $129mn, or $0.06 a share, an improvement on the $380m net loss in Q3 2007.
According to the news agency, Deutsche Bank said it expected fourth quarter results below the per-share consensus with significant pretax losses in North America and Europe, as well as at Volvo and Ford Motor Credit (another report today said that unit is laying off 20% of its staff, 1,200 workers, by July.
"But investors will likely focus on the operating cash burn," Deutsche Bank was quoted as saying, adding that working capital results could be much below the negative $3.4bn it Bank expects due to the automaker's production cuts in North America and Europe.
"The magnitude of the deterioration in results in Europe will be a focus given the severe production declines observed in the fourth quarter relative to flat production through the third quarter," Deutsche Bank said.
According to the report, the crucial question for investors and creditors was whether Ford, which has so far said it does not need US government loans, will be forced to change its plans in the face of a still-contracting global auto market.
The US auto market, the world's largest, fell to 26-year lows in December and was expected to continue that trend well into 2009, Reuters noted.
Ford has sought a $9bn line of credit from the US government as a buffer against a worsening global economy.
Ratings agency Standard & Poor's said in late 2008 that Ford had a few more quarters of comfort than its rivals, but would still face significant danger of falling below cash levels needed to maintain its automotive business, according to Reuters.
Ford burned through $7.7 billion of cash in the third quarter, a rate higher than GM, and has said cash burn rate for the fourth quarter was lower than that, but still significant, Reuters added.