Ford may need to access government aid in late ‘09: Barclays
Written on February 3, 2009
Ford Motor Co may need to access U.S. government help in late 2009, an analyst at Barclays Capital said on Monday, just days after the automaker said it would have the cash to survive the worst downturn in auto sales in a decade without a state bailout.
Analyst Brian Johnson downgraded the U.S. automaker’s stock to “underweight” from “equal-weight” and cut his price target on the stock to $1 from $4, citing cash concerns and an increase in the company’s net debt.
Last week, Ford reported a record $14.6 billion full-year loss and burned through $21 billion for the year, but said it would be able to better conserve cash in 2009 if U.S. sales stabilize in the second half as it expects.
Ford could also relieve some stress on its cash balance by renegotiating its United Auto Workers (UAW) wage/benefits and Voluntary Employees Beneficiary Association (VEBA) contributions along the lines of General Motors Corp’s plan, even without government loans, Johnson said obtain free credit report.
“While this would benefit Ford as an enterprise, in terms of equity holders, providing stock in lieu of cash or debt to the VEBA trust would create significant dilution with about half of Ford’s equity being ceded to the VEBA trust,” he wrote in a note to clients.
Some of the conditions imposed by the U.S. government for its $17.4 billion bailout of Ford’s rivals General Motors and Chrysler CBS.UL were the reduction of debt by two-thirds via a debt-for-equity exchange, making half of VEBA health-care trust payments in the form of stock, and eliminating UAW jobs bank, which pays laid-off workers, sometimes for years. Shares of the company closed at $1.87 Friday on the New York Stock Exchange.
(Reporting by Tenzin Pema in Bangalore; Editing by Gopakumar Warrier)
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