Ford's (F) Balance Sheet Play

Ford’s (F) announced earnings, but it did not pitch its P&L. The star of the announcement, at least in the company’s opinion, was its balance sheet.

The No.2 US car company said that it ended the first quarter with automotive gross cash of $21.3 billion and reduced operating-related cash outflow compared with the third and fourth quarters of 2008 despite further declines in volume .The message was that it can wait out the car industry downturn, even if analysts say it will have to go to the Treasury late in the year.

For the period, the firm had a net loss of $1.4 billion, or $0.60 per share, for the first quarter of 2009; pre-tax operating loss of approximately $2 billion, excluding special items.

Ford’s first quarter revenue, excluding special items, was $24.8 billion, down from $39.2 billion a year ago. The decline is primarily explained by lower sales volume.

Ford profits dropped in Latin America, but at least the company made a profit of $63 million. In the decimated European market, Ford lost $550 million. Asian operations had a small loss of $96 million.

The financial picture at Ford shows how brilliant the move of new CEO Alan Mulally was when he essentially mortgaged the company for $23 billion. He did so while auto American auto industry asset were still viewed as having some value. He built a strong balance sheet before it was clear that the domestic vehicles market came completely unglued.

He probably saved the company.

Douglas A. McIntyre