Ford puts Mazda and Volvo in Hock

[Psionic Wibbly]

Ford pledges Mazda to boost bond sale




By Shawn Langlois, MarketWatch
Last Update: 4:02 PM ET Dec 6, 2006




SAN FRANCISCO (MarketWatch) -- Ford Motor Co., toiling to raise cash to fund its restructuring and gird itself against an industry slowdown, said Wednesday it is pledging its investment in Mazda Motor to boost its revolving credit facility to between $10.5 billion and $11.5 billion.

This announcement follows last week's word that the struggling automaker will put up hard assets, like manufacturing plants and its Volvo line, as collateral to borrow $18 billion.



Ford warned that it expects to burn $4 billion in cash in the fourth quarter and $17 billion more between 2007 and 2009.

http://www.marketwatch.com/News/Stor...2C47C0AE87C%7D&

Man they sure are hard up for dough!

[DanCBJMS1988]

Now why would they do such a thing? That's just plain horrific.

[igor]

because thye need cash .. period

[SSrevolution]

Desperate times call for stupid decisions.

[frenstall]

Cause Ford believes that if they don't get their 18 Billion then they'll be sunk anyway so putting up Mazda & Volvo isn't a big risk given the alternative.

[DanCBJMS1988]

Originally Posted by igor

because thye need cash .. period

But they have a cash SURPLUS! It still doesn't make sense.

[guitarlix]

I hope Ford makes it through this really rough period and emerges a lean and tough company ready to take on the best in the industry.

[mbukukanyau]

Ford has for too long relied on Tapperware interiors and failed to address quality perceptions.
They also have put out alot of lukewarm vehicles to market. Compare Fusion to Aura

[igor]

Originally Posted by DanCBJMS1988

But they have a cash SURPLUS! It still doesn't make sense.

if by surplus you mean - they have cash on hand, then yes.. but any automaker needs about $20bn ON HAND at any given timne - otherwise they might not be able to cover all the liquidity happening every month in the bussiness ...

Ford has right now about $21bn on hand ... and they plan on burning through about $17bn in the comming 3 years ...

by borrowing $23bn with the plan to burn through $17bn, they will have a $6bn cousion in case something happens .. like UAW goes on strike, or something inexpected ...

They are strapped for cash, and are expecting a lot of cash outflow in the coming years .. so they borrowed money..

JUST TO REMIND PEOPLE - THEY DID NOT SELL VOLVO AND MAZDA - they mortgaged them for the loan ... if Ford defaults on this loan, they are toast anyways, the rights to Ford, Blue Oval, Mercury, Lincoln, F-series, SuperDuty, and F-150 brands/trademarks are all already motgaged. So are about half of US Plants and all US Office buildings. IT makes sense they throw in the Mazda stock and Volvo division, and get more money. It does not change their dire situation - they get more money.

In the hopefully unlikely situation of them defaulting on this loan, they would have lost Volvo and control of Mazda anywyas - just makes sense, to actually get the money for those divisions now, insteado frelinquishing the control for free later..

If they do not default and pull through - nothing changes - they repay the $23bn, and get back the title for all the mortgaged property.

Igor

[Ach]

I don't know, that's going to be a pretty burdensome debt service. I always thought that, no matter how bad things got, at least the company would still be in the Ford family. Now there is the real possibility of, say, some Chinese conglomerate snapping up the rights to the brand after a default. I can see the headlines already. How sad.

[69Firebird400]

Originally Posted by igor

JUST TO REMIND PEOPLE - THEY DID NOT SELL VOLVO AND MAZDA - they mortgaged them for the loan ... if Ford defaults on this loan, they are toast anyways, the rights to Ford, Blue Oval, Mercury, Lincoln, F-series, SuperDuty, and F-150 brands/trademarks are all already motgaged. So are about half of US Plants and all US Office buildings. IT makes sense they throw in the Mazda stock and Volvo division, and get more money. It does not change their dire situation - they get more money.

From what I have read, they are able to get better borrowing rates by making these debts secured by collateral rather than unsecured by nothing but their good name. So from that standpoint, it makes sense, because that move ends up saving them money and preserving cash. As long as Ford can hang on and pull through, this will be a non-issue.

Same idea with GM selling 51% of GMAC - they didn't want to do it - considering it's a cash cow for the company - but they had to to get more liquidity for their turnaround. Sometimes companies have to make difficult or undesirable choices to help ensure their survival.

[paul8488]

Originally Posted by mbukukanyau

Ford has for too long relied on Tapperware interiors and failed to address quality perceptions.
They also have put out alot of lukewarm vehicles to market. Compare Fusion to Aura

Bah, the Fusion deserves credit. Might not be perfect, but neither is the Aura. Or Camry for that matter. The Fusion is an example of a car Ford did right, not wrong. Give them their props where they earn it... Lord knows they don't earn it often!

[igor]

Originally Posted by 69Firebird400

From what I have read, they are able to get better borrowing rates by making these debts secured by collateral rather than unsecured by nothing but their good name. So from that standpoint, it makes sense, because that move ends up saving them money and preserving cash. As long as Ford can hang on and pull through, this will be a non-issue.

Same idea with GM selling 51% of GMAC - they didn't want to do it - considering it's a cash cow for the company - but they had to to get more liquidity for their turnaround. Sometimes companies have to make difficult or undesirable choices to help ensure their survival.

We should also not forget, that GM has put up all of GM Canada (that includes the Canadian plants), and the whole Saturn brand (tradmarks and frachise agreements etc) for a similar (if smaller) Secured loan earlier this year. This move by Ford is more Extreme, than GM's, but it is not unprecedented.

GM and Ford has junk credit .. just like any individual with junk credit - they have little chance getting any loans ...

Igor

[igor]

Originally Posted by paul8488

Bah, the Fusion deserves credit. Might not be perfect, but neither is the Aura. Or Camry for that matter. The Fusion is an example of a car Ford did right, not wrong. Give them their props where they earn it... Lord knows they don't earn it often!

true enogh .. besides Aura fights Milan not Fusion ... while the differece is minor, it is enough to actually make a lot of difference incomparison with Aura.. The only thing the Ford twins cannot touch on the Aura is the HF 3.6 ...

Igor

[Member17739]

Obviously Ford is trying to go through this without selling Ford Credit, or a part of it. I don't blame them, FC and GMAC are cash cows, with a decent credit rating either one can make $3B or more a year. The only difference is that Ford will have all that for themselves as opposed to the GM which will get only 49% of the future profits.