Thursday, March 1, 2007

Ford Restructuring -- $11 Billion

From AOL Money News

Ford Motor Co. said Wednesday that its restructuring plan would likely cost $11.18 billion, with more than half of the expenses devoted to programs for laid-off workers.

In a filing with the Securities and Exchange Commission, the No. 2 U.S. automaker estimated spending $5.96 billion on a jobs bank and other "personnel-reduction programs," $2.74 billion to scale back its pensions, $2.2 billion for fixed asset impairment charges and $281 million to idle plants.

Ford said in the filing that it had already accrued $9.9 billion in 2006 and the balance, mostly related to salaried personnel-reduction programs, would be accrued during the first three months of 2007.

The company also disclosed that it has pledged all its buildings, trademarks, intellectual property, shares in the main company, and shares in Volvo, Jaguar, Aston Martin, Ford Motor Credit Co. and other operations as collateral for a $23.4 billion line of credit to fund its restructuring plan and cover losses expected until 2009.

I've been watching the stock of GM and Ford rise for the last few months and scratching my head. Traders are obviously playing the turnaround story, hoping today's efforts to improve their respective positions will pan out. But I haven't seen any encouraging results yet. Ford is in hoc up to its eyebrows -- it has pledged all of its assets against its credit line. Both Ford and GM have a ton of costs coming up and declining market share. I just don't see the turnaround happening yet.

Of course, I've been wrong before so take this with a grain of salt.