http://www.thestar.com/Business/article/594873
Summary
The media report that I am blogging about is how Ford dodged a bailout, so far. Alan Mulally, who is the CEO of Ford, has his names in the headlines but it is less than his competition in General Motors Corp. and Chrysler LLC. Mulally isn’t in the spotlight because unlike GM and Chrysler, he isn’t looking for a tax-payer bailout to stay out of Bankruptcy at his Ford Motor Co. Ford lost $14.6 billion (U.S.) last year. Ford has the strongest balance sheet because of their $13.4 billion (U.S.) in its treasury but they also have $26 billion (U.S.) of debt. Ford only has $13.4 billion (U.S.) in cash reserves and that won’t get them through the next 2 years. In last year’s fourth quarter, Ford had $5.5 billion (U.S.) in losses. Alan Mulally dodged a bailout because he had used his money bracing an economic downturn in which did occur. So basically, Ford had taken huge shots to their cash department but followed through with their strategy that kept them out of a bailout, at least for now.
Connections
This article connects to chapter 5 because chapter 5 talks a whole lot about Cash. See, the chapter talks about the importance of cash and cash flow management to a company’s financial health. As if you can see, Ford had managed their cash in an excellent way, because so far, this has allowed them to dodge a bailout and even though their cash took huge shots, they are still capable of following through with their strategy of staying green. How ford dodged a bailout also connects with the concept of understanding the importance of cash by means of not letting the tax payers bail you out. They had a solid plan B with their backup cash that can last them for the next 2 years.
Personal Reflection
I believe that Mulally is a very smart Business man and he did good. Ford actually showed that they are about the potential investors/buyers because the back-up cash that Ford has shows to the buyer/investor that they are reliable and don’t need a tax-payer bailout as Option B. Unlike other rival companies, Ford showed that they could follow through with their strategy rather than crumbling down and requesting a tax-payer bailout. I think that Ford showed that they understand the importance of cash by the way they had kept a nice amount of money kept back bracing an economic downturn. So basically, I agree with what Ford has done and I believe it will help them out in the future because potential buyers would take this into consideration before investing during these tough economic times.
Mandeep Dhami
Financial Accounting 12
Block A
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2 comments:
I agree with you that the smart strategy Ford is using is helping them out tremendously. By reserving cash for use in these tough times, they will definitely not only have an easier time to get through this crisis, but also be looked up upon by other companies in constructing a similar strategy for themselves because cash is really an important key for success in the business world. I think what Ford has to do now is to try to reserve as much of the cash they have remaining as possible to further avoid a tax-payer bailout until we defeat this economic crisis.
Yichu Zhou
Financial Accounting 12
Block B
This is one article I do understand and support because I am sure that I am not the only one who has heard of Ford's current financial state. They are constantly in the newspaper talking about potential bailouts and plans of their future. It is true; their losses have been great but as you pointed out, Mulally has taken proper procedures in order to reduce the likelihood of this occurring once again. Although, he is taking the initiative, things do not just happen overnight. Therefore, my thoughts are that Ford will have to endure even more losses before producing solid profits. Another point you have showed is the fact Mulally had good management of the cash produced in previous years which allowed them to not be forced into taking a bailout. This is crucial in companies that deal with high levels of cash as many owners become greedy which can often lead to their downfall. In conclusion, I encourage Ford to make a comeback and all the reasons why they will be able to do so have been clearly stated by the author.
Jason Kalirai
Block A
FAC 12
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