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Monday, October 23, 2006

Ford’s Earnings Forecast Blues

The folks down on Wall St. don’t just think that Ford's Q3 will be bad. They think things are going to get worse. Ford last 10 cents a share in the third quarter last year. The consensus for this year’s third quarter is a loss of 62 cents with the early part of 2007 getting worse.

It has been hard to say with any real conviction whether the problems at Ford stem from stupidity or bad luck, although stupidity tends to be ahead in most polls. No matter. Ford has said its US share should settle around 14%. But, if gas prices or poor product introductions make that goal unattainable, two things almost certainly happen. One is that Ford could run low on money. Analysts are starting to talk about that possibility, which naturally leads to talk about Chapter 11. The other action Ford is almost certain to undertake is further cuts. More white collar workers, More factories. More UAW workers. The UAW people may get to the point where they don’t see cooperating as in their best interests. Better to strike than have all of your members out of work.

While Ford struggles, its cross-town rival, GM, at least appears to have reached a period of stability. Global production for the third quarter fell only 3 percent. And the company claims that its emerging market sales are beginning to make up for slow US sales. Units sold in Russia, China and, India are all up by solid double digits for GM.

Ford’s new CEO, a former Boeing man, has not made an imprint on the company yet. So far, he has extended the size of the cuts made under the management of Bill Ford, who may be remembered at the man who destroyed his great-grandfather’s company.

At least Mr. Ford set the fire himself and did not let some outsider burn the company to the ground.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own shares in companies that he writes about.
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