It's going to get worse for Alan Mulally before it gets better. On Oct. 23 the new Ford Motor CEO—officially in the job for less than a month—had to preside over a dismal third-quarter earnings report in which Ford posted a $5.8 billion loss, its biggest one-quarter loss since the recession of 1992.
We know it will get worse because Ford (F) said so. The company stated that its fourth-quarter earnings will decline as it cuts production, watches SUVs pile up on dealer lots, and continues to pay employees to leave the company.
That will put a strain on Ford's cash flow, though Chief Financial Officer Don Leclaire made a point on Monday of saying several times that Ford's cash was adequate to meet the challenge. The automaker had a negative cash flow of $3.1 billion in the quarter, but ended the period with $23.6 billion on hand after it transferred $3 billion from the automaker's VEBA (Voluntary Employee Benefits Assn.) fund. "[Ford's] balance sheet is liquid, but we expect it to deteriorate…[and bond] ratings are likely to go lower," says Shelly Lombard, an analyst at Gimme Credit.
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