Will Ford Enter Bankruptcy?steemCreated with Sketch.

in LeoFinance •  2 months ago 

It is no secret that the automobile industry is in shambles. With people being home bound, few are venturing out to car dealership to buy vehicles.

The last couple years were rough for the automobile industry. Ford has suffered alongside other companies although they did have a degree of protection.


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Ford is the largest maker of pick up trucks. The F150 is by far the most popular vehicle in this class. This helped to keep Ford from collapsing completely.

In spite of this, the company has a lot of issues. Since 2014, the company invested billions trying to restructure the company. It did away with a lot of models trying to streamline the automobile segment. The company also closed a lot of its European operations as it was not faring well there.

For the last few years, the Net Income has really dropped even though revenues increased slightly. The company is also faced with an industry that is changing as electric vehicles become more popular. Most of the manufacturers are believed to be ahead of Ford in this area too.

The challenge for Ford right now is the fact that housing is likely going to see a massive pullback as the economic impact from the coronavirus filters through the world. Projects that were started might see completion yet, at some point soon, the flow of new projects is going to end.

This will put a crimp in the construction industry which is Ford's bread and butter for the pickup trucks.

How bad a hit can the company withstand?

At the end of 2019, it did have $34 billion in cash (and cash equivalents) on hand. Unfortunately, they have around $98 billion in short-term liabilities. This could make things very difficult if banks are not willing to refinance the debt.

https://www.marketwatch.com/investing/stock/f/financials/balance-sheet

Ford does not have the best credit rating on its debt, having been downgraded repeatedly over the past few years.

Obviously, a great deal of this equation depends upon the coronavirus. If things are locked up for more than a month, it could be bad news.

Ford's North American operations are shut down so production, like all other manufacturers, is going to be off. I would imagine that there is a lot of inventory on the lots of dealerships across the country. This helps their numbers since a cor is sold as soon as it is shipped to a dealer. However, the likelihood of dealers ordering more inventory any time soon is not likely.

During the last financial crisis, Ford was the only of the Big Three that did not need bailout money. It does not seem that they will be able to avoid this fate this time.

An orderly bankruptcy might be in store for one of America's oldest car companies.


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I'm personallly trying to figure out where the bottom is as I been short since $9 with options. However, I just looked at the monthly chart and think $2 is in the cards for Ford.


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What do you guys think about GM? Any better prospects than F?