Is There a Ford in Your Future?

Friday, December 01, 2006
Quite possibly not. Ford made a bet the ranch move when it announced that it was putting up all its property as collateral for $18B in new debt to tide the company over until '09. In doing so it put a knife in holders of current debt - Fitch, Moody and Standard & Poor's all dropped old Ford debt to junk status (CCC) which means that rather than have a chance of recovering 68 cents on each dollar of debt held the probability now becomes around 34 cents in the event of a default. The new debt appears to be a rather large poison pill designed to keep the current failed management firmly ensconced in their office suites until bankruptcy is forced upon them. While the 38,000 job buyout will chew up any earnings over the next two years it will not mitigate continuing sales losses in the light truck market to both GM and Toyota. Toyota beat Ford in unit sales in November and the opening of a new plant to make the new full sized Tundra pickup at an annual rate of 200,000 units does not bode well for a Ford recovery.

The UAW is the real poison pill that what used to be the Big Three swallowed long ago. While betting on a Ford in your future might be unwise, betting on Toyota being smart enough not to hire many of the UAW members taking the Ford buyout and moving to Texas is probably safe. I wonder what the hourly wage for the last UAW member will be?

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