Ford: The healthiest patient in the ICU
Although Ford Motor may get through 2009 without needing federal loans, it still has many of the same problems as cash-starved GM and Chrysler.
NEW YORK (CNNMoney.com) -- Ford Motor may not be facing an immediate cash crisis like its U.S. rivals, but the company primarily looks good only by comparison to General Motors and Chrysler LLC.
On Friday, President Bush announced a rescue plan for GM (GM, Fortune 500) and Chrysler that will make $13.4 billion in federal loans available almost immediately. Both automakers said they needed the funds to avoid bankruptcy.
Ford (F, Fortune 500), on the other hand, had cash reserves of nearly $19 billion at the end of the third quarter, which the company says should allow it to weather the current turmoil facing the industry. It also has access to a $10 billion bank line of credit.
Ford requested $9 billion as part of the $34 billion loan package to the Big Three that was defeated in the Senate last week. But Ford has repeatedly maintained that it only wanted access to the funds in case trouble in the auto market lingered longer than it expected.
The company had the foresight to borrow against its property and assets two years ago, a move that seemed risky at the time but now appears to be brilliant.
However, it's not as if Ford's cash cushion can last forever. Ford's automotive operations burned through $7.7 billion in cash during the third quarter, nearly a billion more than GM, even though GM's auto operations are larger.
As such, some leading industry experts say that the challenges facing GM and Chrysler still threaten Ford.
"I don't know if their restructuring has been any more dramatic than the others," said Bob Schnorbus, chief economist with consultant J.D. Power & Associates. "It's the way they financed that restructuring that has put them in a better position."
To be sure, Ford has been able to shed non-core brands such as Land Rover, Jaguar and Aston-Martin and sell its controlling stake in Mazda. It is looking to also sell Volvo.
It has also slashed hourly staff and capacity in the past few years, closing 17 plants and eliminating 56,000 jobs since CEO Alan Mulally joined the company in September 2006. Still, more cuts are likely necessary according to Bob Schulz, chief automotive credit analyst for Standard & Poor's.
"They've been taking out cost and shrinking for years, but market share has always come down faster," said Schulz.
Ford is also saddled with basically the same labor contract with the United Auto Workers union as GM and Chrysler. While the 2007 labor pacts should narrow the gap between the U.S. automakers and the nonunion U.S. plants operated by Asian automakers such as Toyota Motor (TM) and Honda (HMC) by 2010, it won't be eliminated.
Shelly Lombard, the automotive credit analyst for Gimme Credit, said Ford was widely considered to be in the weakest position among U.S. automakers when it arranged for the financing it needed in 2006. She said that greater need forced it to line up financing when banks were still lending.
"People say it's better to be lucky than good," she said. "I'm not saying they are not good to line up the financing when they did, but you have to attribute it to luck."
Lombard also questioned whether Ford will be able to hit all the targets it lays out in the turnaround plan it sent to Congress earlier this month when it, GM and Chrysler were pleading their case to legislators for a bailout.
For example, Ford expects industrywide sales to improve in 2009 from current levels, which are at a 26-year low. Ford estimates car and light truck sales of a little more than 12 million in 2009.
But that is more bullish than the forecasts of GM and Chrysler, as well as independent estimates from firms like J.D. Power, which expects 2009 sales of only 11.4 million vehicles.
What's more, the ability of Ford to meet its sales targets rests with many factors outside its control.
"The volume of new vehicle sales is going to be determined by the economy first and foremost," said J.D. Power's Schnorbus. "That's where there is the most concern and least visibility."
Ford's plans are also centered around shifting its focus to smaller, more fuel efficient cars, away from pickups and SUVs. Its plans also focus around a new generation of electric and hybrid-electric vehicles in the next few years, vehicles that are unlikely to make money in the short-term.
Since it first announced that shift in focus, gas and oil prices have plunged, which could limit demand for the vehicles it is now counting on to lead its turnaround.
And even if small car sales continue to gain market share, those vehicles have far lower prices than the light trucks that used to drive Ford's profits.
Ford insists that its plans to bring in more fuel efficient models from Europe should help it finally start making money on small car models. But analysts say that will probably be the toughest challenge of all in its turnaround plan. Their ability to achieve that goal will determine the company's long term success more than anything else, said Lombard.
"If they don't do that, they're not going to live," she said. 
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