The earnings report released Thursday by Ford (NYSE:F) holds eerie parallels to one issued last year by General Motors (NYSE:GM) just before it headed toward the brink.
At the time, GM's $15 billion loss was an utter disaster, but it followed it up a short time later with a bit of brinksmanship as it drew down every last penny of its $4.5 billion credit line. The all-in bet was in part to try to get Washington to pass a bailout bill. When that hadn't happened by December, GM had to beg for a lifeline. Without the cash, it said, it would run out of money.
Compare that timeline with Ford's. On Thursday, it reported the biggest annual loss in its 105-year history. It lost $5.9 billion in the fourth quarter and $14.6 billion for all of 2008. It also decided to drain the remaining $10.1 billion in its credit line; it was left with just $13.4 billion in cash at year's end. With costs running the way they are -- it has burned more than $5 billion in just the fourth quarter alone -- Ford could blow through that cash in just a few months.
Despite the similarities, though, there are also some notable differences. CEO Alan Mulally says Ford will lose money both this year and next, but reiterated that in 2011 it will turn profitable once again. Further, unlike either GM or Chrysler, Ford is still not pushing to receive a government handout. It insists it will make it through the crisis on its own and isn't trying to force the government's hand to give it money. Of course, Ford can afford to be a bit cavalier about this, knowing full well it can always turn to the government should it need to do so.
Ford also says drawing down the credit line shouldn't be seen as an act of desperation, but rather one of prudence. It's concerned that if it didn't tap lines of credit now, it wouldn't be able to if and when it really needed to.
But troubles still loom. Ford's largest parts supplier, Visteon (NYSE:VC), is facing a potential bankruptcy situation, and the carmaker says it's not willing to take a bullet for it. Visteon diversified its customer base away from Ford to include GM, Chrysler, and Nissan (NASDAQ:NSANY), unlike GM supplier Delphi, which is still very much tied to that carmaker. But a bankruptcy filing by any one of them would cause a ripple effect that might take down other more precariously positioned suppliers, like Lear (NYSE:LEA). The parts maker reported a pre-tax loss of $692 million Thursday and has fallen out of compliance with some terms after failing to repay borrowings by the end of the year.
Although still in control at this point, Ford looks like it's driving with just one eye open.
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