Ford: UBS changes to Sell from Underperform
The following is a summary of a UBS full-length report on this topic, dated January 24, 2006.
* 4Q05 better than expected; significant 2005 cash burn:
Ford released 4Q05 earnings that were at the high end of guidance with reported EPS of $0.26. However, the company burned through $4.1 billion in operating cash flow after capex in 2005. In our opinion, the company's restructuring plan does not sufficiently address the most important issue for F, the challenge of increasing revenues.
* We change to Sell from Underperform:
In light of our expectation for tough auto market conditions in 2006, further cash burn at F, possible market share losses, and substantial difficulties in implementing its restructuring plan we change to Sell from Underperform. We downgrade F to B+ from BB and maintain a "Deteriorating" credit trend.
* Ford Motor Company: Sell Ford Motor bonds:
In light of current spreads and increased credit and default risk at the auto unit, we recommend that investors sell Ford Motor Companybonds.
* Ford Motor Credit: Sell bonds with maturities after 2008:
We recommend that investors sell FMC bonds with maturities later than 2008. Notwithstanding continued expected profitability at FMC, we expect FMC bonds to perform poorly in the context of deteriorating operations at F and expected declining profitability at FMC.
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