Ford Motor Company suffered its worst loss in its 105 year history, when it lost $5.9 billion in the fourth quarter and $14.6 billion in 2008 but reiterated that it would not seek government bailout but dip fully into its $10.1-billion line of credit that it secured two years back.
The auto maker's 2008 loss of $14.6 billion surpassed its earlier record of $12.6 billion in 2006. Although it burned through $5.5 billion cash in the last quarter, Ford still has $13.4 billion on hand, making CEO Alan Mulally confident that it will still not seek a handout from the government.
In 2007, the Dearborn-based company posted a loss of $2.7 billion and 2008 total revenues dropped by 15 per cent to $146.3 billion from $172.5 billion the previous year.
With auto sector sales plunging steeply in the US, more so in the last quarter, Ford's sales declined by one-third to $29.2 billion with only 1.14 million vehicles sales globally in the quarter.
Its 2008 sales was 5.4 million vehicles, down by 18 per cent compared to 2007 as buyers turned to Japanese car makers for smaller and more fuel-efficient cars in the wake of soaring oil price and acute credit crunch, making it extremely difficult to secure auto loans.
Along with declining sales, Ford reduced global dealer stocks by more than 50,000 vehicles than in the previous quarter and now has the lowest days supply in the industry.
It also reduced automotive costs by $1.4 billion in the fourth quarter and $4.4 billion in 2008 compared to year-ago levels and reduced cost by $5.1 billion in North America at year-end 2008 compared with 2005 excluding other cost and is projecting a further $4 billion savings this year.
The other steps it took to become viable, Ford cut another 1,200 jobs in its finance unit and negotiated with the United Auto Workers union to end the ''jobs bank'' at Ford. The company said that it is working with the union on the details of implementation.
Forced to go with the global trend of eco- and more fuel-efficient vehicles, Ford will soon be introducing European models such as the Fiesta and the Focus in the US.
Ford, which is in better financial shape than its cross-town Detroit rivals, General Motors and Chrysler, which have received $17.4 billion from the US government to avert bankruptcy (See: Bush offers $17.4 billion to bail out GM, Chrysler), has always maintained that it will not avail any aid.
Alan Mullaly said on conference call, "Ford has sufficient liquidity to make it through this downturn. We would require a government bridging loan if there's a significantly deeper economic downturn or a significant industry event."
''Given the instability of the capital markets with the uncertain state of the global economy, we believe it is prudent to draw these credit facilities at this time,'' he added.
Industry experts opine that Ford, in the short-term, may have bailed itself out by dipping into its $10.1-billion credit line, but if the economic slowdown continues for a long time, car sales may decline further, which may force the car maker to seek a government bailout.
But Alan Mulally remains optimistic as he feels that with the current economic stimulus announced by the new government and with the plan to come out with another bank bailout, the US economy will have enough grease to start the economy rolling again.