DETROIT — With credit lines drawn and most sources for cash tapped, Ford Motor is down to seeking government loans, selling Volvo and cutting costs as ways to bolster reserves.
Ford leaders say they can get through the economic crisis without emergency loans from the U.S. government. But that's far from certain as losses mount and the recession shows little sign of bottoming out.
Ford ended 2008 with cash of $13.4 billion after depleting reserves by $5.5 billion during the fourth quarter. The automaker posted a record net loss of $14.6 billion last year.
The total included $7.61 billion of special items, such as charges for reducing employees and dealers.
Year-end cash dropped close to the $10 billion that some analysts say Ford needs to support operations. Ford officials decline to confirm a number for minimum cash, but they acknowledge finances are tight.
Last month, Ford generated $2 billion by liquidating stocks and bonds in an account set aside for the UAW. In return, the UAW gets interest and a note for full payment by the end of 2009.
That was done "because January was going to be so tight because of the lack of production at the end of the fourth quarter and the very early part of January," CFO Lewis Booth said.
Last week, Ford drew down the remaining $10.1 billion available in credit lines. Booth says that money isn't for funding operations, but Ford wanted to move the cash into its accounts now, given the shaky financial markets.
Not counting money used in January, Ford's cash stands at around $26 billion. That includes the year-end cash, the $2 billion from the UAW account, the $10.1 billion drawn from the credit lines and another $500 million that is already encumbered.
Steadier production should dramatically reduce cash burn in 2009, Booth said.
But it's not clear that will be enough: Although Ford is counting on a sales lift in the second half compared with today's levels, Booth acknowledged there is no sign of a recovery.
Ford reduced its 2009 industry light-vehicle sales forecast to as little as 11.2 million units. In December, the company told Congress it expected sales of 12.2 million vehicles.
Ford is making "extreme efforts not to use federal funding," Standard & Poor's analyst Efraim Levy said in a research note.
The company reduced its stake in Mazda to raise cash. A sale of Volvo could raise more. Though it wants to avoid emergency operating loans from the government, Ford does expect to borrow money this year through the Department of Energy's program to help fund fuel-efficient vehicle projects.
Aside from those options, Ford is concentrating on its own cash creation through cost cutting and improved efficiency. More restructuring is on the table, Booth acknowledged.
"That's what you do when you have cash-burn issues," Booth said. "When the revenue line is as tight as it is, it's mostly around cost."