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Thursday, September 14, 2006

Is Ford A Step Closer To Chapter 11? (F)

The Detroit News reported to day that Ford's loss for the year could be a staggering $9 billion. Over $3 billion of that number would be for restructuring, according to documents that the newspaper got from inside the company.

Ford's share have been taking a beating on the news, down about 4%.

Even with a new CEO on board, it will take several weeks, or even months, for him to see what needs the most attention. By then, it may be too late. Ford's North American operations, which account for the company's big losses, have a share of just above 17% in the US, down from 25% just a few years ago. Any further attrition in that number and the costs that the company plans to take out now may not be enough.

Chapter 11 is not the last refuge of scoundrels. Airlines, steel companies, and car part corporations like Delphi have been using it for years. The airlines that resort to bankruptcy just keep flying no matter homw many times they go in and out of Chapter 11.

The clock is ticking for Ford, and so is the likelihood that it will have to seek court protection to stay in business.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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