Ford's Deepening Hole

Ford (F) delivered an awful quarter with 8.7 billion dollars of losses, the worst showing in its history. What was most troubling for Ford was their $2.1 billion write-down in their credit division due to losses on lease resales at auction. As discussed in my previous article here (Ford's Financial Service Business About to Enter the Red), Ford has been surviving (barely) these past 7 years on income derived from their financial services. From 2001 through 2007, Ford made $21 billion from their financial arm but still went on to lose a cumulative $18 billion! That was their last support. Without the profitability of that division, Ford is in free fall. The credit markets are making it harder to borrow, the value of vehicles that come off of lease is falling, and the division's debt is sky high at $142 billion.

As Ford continues to burn cash in write-offs and retooling itself, it continues to pile up debt. Their conference call indicated that their automotive division would be increasing its debt from $26 billion to $32 billion. Its decimated financial services division struggles under the yoke of $142 billion in debt. Currently Ford has arguably the worst debt/share and revenue/debt position of any other car company (see Ford and GM Living on Borrowed Time).