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USA: Ford fights back over gloomy bankruptcy prediction - paper

By just-auto.com editorial team | 7 March 2003

Ford is fighting gloomy predictions that it could be forced into bankruptcy, weighed down by debts of $US150 billion (£94 billion), stumbling sales and a sluggish world economy, the Daily Telegraph’s New York-based correspondent reported on Friday.

The paper said a scathing examination of the motor icon's balance sheet by the analyst famed for predicting that WorldCom and Enron would go bust long before Wall Street realised those companies were doomed puts Ford's future in doubt.

The Telegraph said that Sean Egan, founder of the Egan-Jones ratings agency, offers eight reasons why Ford could be in serious trouble including huge pension fund liabilities and a lack of cash to fund borrowings.

"If it didn't have the name Ford, it would be in bankruptcy right now," Egan said, according to the newspaper.

The Daily Telegraph said Egan argues that Ford's shareholder equity of $11 billion would be wiped out completely if an adjustment was made for the pension fund liability, even before another $10 billion in healthcare costs for retired workers is included.

He believes Ford's survival is dependent on investors remaining supportive, the Daily Telegraph said. The shares slipped 31 cents to $7.45 on Thursday, close to an all-time low.

The newspaper said other concerns for Ford include the amount it has to repay by the end of the year - $18 billion, rising to $26 billion in 2004 according to Egan - and the slim chance of a bail-out from the government should the worst occur.

No Wall Street firm the Daily Telegraph contacted yesterday would come forward to defend Ford - analysts were "in meetings" or "very busy".

The Daily Telegraph said the last note from JP Morgan rates the shares a sell. Morgan Stanley says in a recent note to clients that "cost problems may not be abating", "cash flow is likely to be difficult this year", and "it remains unclear how the company expects to gain market share".

A spokesman told the Daily Telegraph: "Ford is fundamentally strong and we continue to improve our business performance. Our corporate revitalisation plan is gaining momentum on every front. As we prepare to celebrate our 100-year anniversary we are confident in our outlook for a successful future."

The newspaper said that Grant's Interest Rate Observer, a Wall Street newsletter, said that a crisis at Ford would "nudge Saddam Hussein off the front page".