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Thursday, November 02, 2006

Dead Cat Bounce For Ford (F)

The market applauded Ford’s October sales numbers so loudly that investors must have thought that Pavoratti had taken the stage for one last performance. Ford’s stock rose 3% to $8.52 on the news that its US car sales rose 22% from October of last year. In the small print, it said that last October was abysmal because it fell after a period of huge incentives that drove summer 2005 unit sales up. Truck sales were flat, and that is where Ford’s most profitable vehicles, like its F-Series pick-up are.

Even with its October numbers, Ford has offered no evidence that the company is not still in a long, dark tunnel According to the WSJ: “At Ford, October vehicle sales jumped 8% from a year earlier but were off 9.6% from September.”

Inventory problems will make production cuts necessary for the first half of 2007.

And, in the minds of some, cash is starting to become an issue at Ford. The company went through $3.1 billion in Q3 and is forecast to eat another $3.6 billion in Q4. That would take into account unit sales like the company showed in October. Ford has over $23 billion in the bank, but another year like 2006 would leave the company very close to the edge.

Ford has come up quite a bit from its 52-week low of $6.06 and it is hard to figure out why.

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

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