Ford Posts $997m Profit, Projects Solid Income - Ford, CAW reach production pact

[lio45]

Good for Ford, its stock, and my wallet.

As someone said already though, I'm a bit worried the union will immediately see this and assume Ford can afford to be generous to them. Thinking aloud, is there a reason why they didn't they pull some expenses forward for this quarter and push some profits back so the results don't look that good at this time of negotiation? I don't think the UAW would have been fine-combing over the books too much...

Just a thought...

[wescoent]

Originally Posted by joemac

Ford declares $1B profit for the quarter but yet adds $800M in debt during the same period. Interesting how accounting works.

Mmm?

An example:

So Ford sells $800 million dollars worth of vehicles using Ford Credit financing. The customer gets the vehicle, and is paying a 8% loan on it.

However, Ford's North American car operations needs the cash right now to pay assembly line workers, keep the lights on, fund vehicle development.

So Ford Credit borrows $800M in cash, at 4%, from JPM Chase's commercial bank, which it gives to Ford's car operations.

Ford's new customers owe Ford Credit $800M for their new vehicles, and Ford Credit owes JPM Chase $800M for the loan they took out.

Ford Credit assumes the risk that the customers won't pay them back, and in return, keeps the 4% spread between the rate the customer is paying, and the rate they borrowed the cash from JPM Chase.

Debt goes up $800M (the loan from JPM Chase).

Assets go up $800M (the loans to the customers who OWE Ford Credit).

Net financing result, at the moment, is zero, and doesn't affect net income.

Any questions?

[lio45]

Originally Posted by joemac

Ford declares $1B profit for the quarter but yet adds $800M in debt during the same period. Interesting how accounting works.

Without looking or knowing what I'm talking about, I would assume that added $800M in debt is backed by an added $800M in worth...

[lio45]

Originally Posted by wescoent

Any questions?

No questions, but at least a comment: thanks for the explanation.

Your post makes mine, just above (which I was writing before yours appeared) mighty useless.

[Simon says]

Originally Posted by wescoent

Any questions?

No. Only one comment: Interesting how accounting works.

[2002 Caddy]

Originally Posted by wescoent

Ford Credit assumes the risk that the customers won't pay them back, and in return, keeps the 4% spread between the rate the customer is paying, and the rate they borrowed the cash from JPM Chase.

Net financing result, at the moment, is zero, and doesn't affect net income.

Just to add and clarify...
If all (or almost all) of the customers pay off the 8% car loan... Then the increase in debt... has an effect on net income... it goes up...

This is how banks are now all (almost all) making huge profits... they are being ultra conservative as they lend at 4 or 5% and the government is basically giving them money at 0-1%... They (like Ford) make money on the spread. That is as long as people don't default...

If you read the fine print of the Ford announcement... Cash flows are up, Cash position is up and Debt is being retired... All good news.

[Panthers_4ever]

Great news and mr.Mulally thank you very much .

[ARCANGEL]

Bravo Ford! Shows what good management and product can do!

[mkwelbornjr]

The UAW will never learn. Now Ford will be less competitive than GM with its new contracts.

Originally Posted by poncho1982

Ah, now we see why the UAW rejected the new contract.

They don't need to reduce costs, evidently.

Sorry, couldn't resist.

[Pinnacle]

Originally Posted by Hitman1970

Good for Ford and my Ford stock.

Exactly, I was gonna drop $5000 for some Ford stock, I knew this was gonna happen. Up .56 cents today

[dagr382]

Ford plainly has a better idea.

[All-Or-Nothing]

Originally Posted by Pinnacle

Exactly, I was gonna drop $5000 for some Ford stock, I knew this was gonna happen. Up .56 cents today

I bought some major shares in Feb and again in April against my wifes better judgement. Guess I got the last laugh.

[goblue]

Great for FORD, bad for UAW negotiations with FORD.

[AMERICA 123]

Originally Posted by wescoent

Mmm?

An example:

So Ford sells $800 million dollars worth of vehicles using Ford Credit financing. The customer gets the vehicle, and is paying a 8% loan on it.

However, Ford's North American car operations needs the cash right now to pay assembly line workers, keep the lights on, fund vehicle development.

So Ford Credit borrows $800M in cash, at 4%, from JPM Chase's commercial bank, which it gives to Ford's car operations.

Ford's new customers owe Ford Credit $800M for their new vehicles, and Ford Credit owes JPM Chase $800M for the loan they took out.

Ford Credit assumes the risk that the customers won't pay them back, and in return, keeps the 4% spread between the rate the customer is paying, and the rate they borrowed the cash from JPM Chase.

Debt goes up $800M (the loan from JPM Chase).

Assets go up $800M (the loans to the customers who OWE Ford Credit).

Net financing result, at the moment, is zero, and doesn't affect net income.

Any questions?

Ah, Ford now produces 80% of its on paper profits from auto lending - well, that's just dandy.

..... so excluding all the one time 'considerations' means then that all other - including continuing automotive manufacturing operations only contributed less than 200 M ?

And on that approximately 800 M in automotive lending......

Gee, I wonder, given how things are going..... what the inflation and default rates will really be over the next 4 - 6 years... a 4% spread sure sounds... how shall we say - ' boldly assumptive ' ?

[44 mpg by 2010]

Originally Posted by dagr382

Ford plainly has a better idea.

Based on "best guess" total US sales through 2012 of about 10 to 11 million units annually and Ford's expected market share 15% to 20%, it appears that Ford continues to be overstaffed with "direct production" personnel by 15% to 30% at least through 2011.

Only a RADICAL change in product offerings can be expected to BOOST annual volumes in this economic environment ("dug-in" and "cash conserving" consumers).

One possibility is to quickly open up the FUEL FRUGAL segment in the US, ie, passenger vehicles rated 51 and above mpg(Imperial) combined cycle [about 43 to 66 mpg(US) combine average] and pickups/vans rated 36 and above mpg(Imperial) combined cycle [about 30 to 55 mpg(US) combine average], like Ford's EU product.

This is the ONLY way I can see that will encourage the US consumer to WILLINGLY "put money on the table" and EXPAND the US market DEMAND.

Anybody got a Better Idea?

Of course, Ford could move all production out of the "rust belt".