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Author: TMFBreakerTAllan Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 18054  
Subject: Re: Ford on the Move Date: 3/13/2007 8:01 AM
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Rob

My point was lost. The debt is a concern - as before. They went to the bank and secured loans because they got a better deal than attempting to issue bonds. I wouldn't be as concerned because of the structure (collateralized) of the loan. I don't think that is significant difference because the company is faced with fewer options to stay finacially solvent.

If Ford has truly pared down operating costs to actual production as they said they would, then the company will slowly fight its way back as its foreign competitors start adding debt in terms of US employee costs. Toyota sits on 100 billion in debt v. about 200 billion in revenue. HMC has less debt. And Ford has a long way to get the balance sheet back in order to catch up.

I have no illusions that what you say is correct. Ford is going to have a rough ride - that I think we agree on. And the more I look at Ford (and GM also) in terms of investment, I am convinced that they need outside intervention in order to become truly profitable.

Selling Aston Martin is a start - I think they could do more sooner and take more losses now to make the future look better.

There are no easy answers here for Ford. But I think Ford's competition is not the foreign cars right now, but GM and Chrysler. They are competing with for the buyer that is willing to buy an American made (whatever that may mean) automobile or truck. Although we seem to couch the competition as being Toyota and Honda, that is not this year's or next year's competition. Especially if, as Rob reported last year, less than 25% of Americans would even consider a Ford product.

But back to the debt - what was worse - taking on the collateralized debt this year (and probably the next two) or getting even further in debt with new bonds that wouldn't find buyers at much higher rates? That was my only point - and with the total debt exceeding revenue for the past 12 months (or longer, I didn't keep notes) the company is in trouble and must increase revenue, cut operating costs, and pay off as much debt as possible. And in the past, Ford (along with GM and Chrysler) have cycled out of these bad times. I think the share price out there is relying on the auto industry being cyclic and that the leaner F and GM and DCX that are being made will take advantage of the next buying "cycle." And that brings us back to what Rob has reported for over a year:

Ford can't even see a profitable year until 2009 or 2010.

As an investor, I will wait and see what the market has to offer. A presidential race in 08 and the attendant market insecurity may seriously depress Ford to the point that it is worth buying some shares. Ford may start to look good as an investment if it can find a bottom in market share and start inching up. But that inch up has to be scaled to real operating costs. And I really think that the inching up will come at the expense of GM and DCX - not Toyota and Honda.

T. Allan

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