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Thursday, October 05, 2006

Ford Bankruptcy In The Air Again (F)(TM)(GM)

The media is raising the issue of whether Ford has the cash to go through its turnaround. Its cash stake may be down to $20 million at the end of this year. Moody's rates the debt B3. According to the rating firm, 26% of B3 rated stocks go into Chapter 11.

Investors would think that it would be time to off-load Jaquar now. The company is said to lose about $1 billion a year now. And, US sales for the Jag were off 50% in September.

Ford could get into further financial trouble if its calculus about expenses or market share are wrong. The No. 2 US automaker believes it can take $5 billion out in annual costs. Labor unions will have to cooperate, which is not a given.

Ford is also betting that its marketshare will bottom at 14% in the US. But, with Toyota's sales in this country growing at double digits and a healthier GM across town, the market share target could be in trouble.

The same holds true for Ford.

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

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