Let's be honest.
Any time a company burns through 59 million dollars in cash every day, it's not good.
But for Ford , burning through $5.5 Billion ($59 million a day) in cash in the fourth quarter is a huge improvement from burning $83 million a day in the third quarter. Hey, in this economy you take small victories when you can get 'em.
This morning, after Ford announced a fourth quarter loss of $5.9 Billion, I talked with Ford CEO Alan Mulally. He's certainly not happy with the fourth quarter results, but he is encouraged with the progress Ford is making. In fact he reiterated that Ford remains on track to turn profitable by 2011. More importantly, he stressed Ford's position it has no plans to seek a government bailout.
Mulally thinks his company can ride out this recession because it has enough cash on hand ($24 Billion) and is steadily slowing down how quickly it burns through that cash.
How has Ford done it? By downsizing the business.
Remember last fall when Ford started slashing production? It was one of the more aggressive auto makers in idling and shutting down assembly lines. Those moves, while initially costing money, have resulted in Ford drawing down inventories, lowering receivables, and in the end, slowing down its cash burn rate. Meanwhile, revenue was a little stronger than expected, thanks in part to an improving mix of sales.
- Ford's Mulally, "We're Close To A Bottom In Car Sales"
Sure, the mainstream press will rip these guys for another quarter of staggering losses. Forget about that. The story about Ford's turnaround is primarily about whether or not it has enough cash to ride out this storm. It ended the year holding $24 Billion and needs roughly $10 Billion to run the company day to day.
Mulally and his crew are nowhere close to getting out of this mess, but they can see light at the end of the tunnel.
In these dark times for auto makers, that's more than most can say.
(An earlier version of this blog misstaked the time period of Ford's cash burn.)
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