Legislative filibuster means Ford flourishes
The automotive bailout continues to go through the legislative branches and then to the President for signature. I would have blogged about this when it first appeared that the automotive bailout would come through, but just as expected Republicans in the senate are taking a hardline approach on future bailouts. Senators have lined up to show their lack of support for the $14 Billion bill, which is of course just 2% of what Congress tossed the banks in the $700 Billion bailout.
Ford is the only one of the Big Three refusing government help this time around, perhaps banking on the idea that American’s will buy Ford automobiles to show their support for a company turning down Federal funds. Or it could be that the Big Three will become the Big Two, then the Big Ford when GM and then Chrysler fail due to their own debts.
Since Mulally took over the helm as CEO he has cut costs and began to mortgage Ford’s existing assets for lines of credit and even cold hard cash. For his efforts Ford has obtained more than $23 Billion in cash and credit and has stockpiled much of it. As of September 30th the company had $19 Billion in cash and more than $10 Billion in credit lines. But in the third quarter of 2008 the company lost $7.7 Billion in cash to fund its operations.
A filibuster this week of the automotive bailout will be the best thing that has ever happened to Ford. When GM declares inevitable bankruptcy as they run out of cash in early 2009, Ford’s marketshare should grow to new levels. The failure of GM could easily mean that Ford quickly returns to profitability, just as it did in the in the first quarter of the year.
Stay on the lookout for any quick changes in the automotive industry. A filibuster means that Ford retains its business and the others fall into bankruptcy. For the long term investing approach, some dollar cost averaging of Ford stock might not be a bad idea.
