Key questions and answers from the third quarter earnings call conducted by Ford Motor Co. (F) on November 7, 2008.
John Murphy (Merrill Lynch):
Can you provide additional colour on working capital, especially the payables?
Lewis Booth: The payables did come down significantly because of a lot of production and we do expect some further reductions in the fourth quarter because of the lower production in the fourth quarter around the world.
We would expect to see that begin to flatten out as we look forward to 2009 as production begins to settle, and perhaps grow it towards the backend of the year as we begin to see a very modest recovery.
K. R. Kent: On the receivables, generally the receivables are paid off by the credit company really short term. It’s like two and a half days or so that we put them on to our books and then it would be wholesaled out to the dealers. And payables are a much longer term.
John Murphy (Merrill Lynch):
Can you give us an update on where you stand on capacity actions and highlight a little bit the delta between your structural capacity and your man capacity and how cost savings might develop as you cut capacity going forward?
Lewis Booth: In the very near term we’re going to have some down production weeks, particularly in the U.S. In the fourth quarter as we continue to lower production to make sure we don’t build stocks. We did that in the third quarter.
What we really try to do is make sure we keep production in balance with demand because we don’t want to build dealer stocks in this period. Longer term it is very much going to depend on what happens to the economic outlook in 2009 around the world.
Alan Mulally: We continue with our plan to make the best economic decisions in the near term because clearly some of the plants, we are not using to full utilization. But we have great contribution from the products that are there.
And we are absolutely going to tie the changes that we make to increase the utilization and the efficiency to when it makes sense economically with our product cycle plan with the product strategy going forward.
And we feel we really have improved that over the long term and so as we go forward we will share more of that with you with the cycle plan.
John Murphy (Merrill Lynch):
What do you see in this potential help from the government, or is there the potential for Ford, given all the liquidity that you pulled in at the end of 2006, to get through this without any government support?
Alan Mulally: During the 2007 Energy Independence and Security Act, that legislation last year, I was really proud of Ford, we stepped up to be part of that solution. And in addition to the conversation on fuel mileage and the commitments we made on that, we also had a very good conversation about the investment it takes to bring those fuel-efficient technologies to market.
And then they also included in the legislation low government loans to help us support the implementation of that fuel-efficient technology. So that piece of it now has gone to the Department of Energy and yesterday they released the draft of their criteria for applying for those loans.
We spend time talking about that and understanding that. And then of course we will bounce our product development and our enabling technology plan up against that and get our request in sooner rather than later. So I am very pleased with the development in that area.
On another piece, associated with the government’s work to free up the credit, on Ford Credit’s side we have registered to sell up to $16.0 billion of asset-backed commercial paper through the U.S. government’s commercial paper facility and through October 31 we have utilized about 25% of that. So that’s a key part of freeing up liquidity for everybody but specifically for Ford Motor Credit to be able to make the loans that the customers really do need.
One of the things we talked about was having a bridge loan capability that we could access if it deteriorated substantially. Our basic plan is to enhance our cash position, continue to invest in the new products that people really do want, and continue on our restructuring. And we are not assuming that kind of help from the U.S. government because clearly we don’t know what that might be.
Christopher Ceraso (Credit Suisse):
What is your position, or willingness, to the extent that you do participate in additional bridge loans, in granting equity or warrants in the company?
Alan Mulally: What we talked about yesterday is we would want to specify the specific funding mechanism but we were certainly open to talk about the different possibilities. But we’re not that much further than that right now.
Himanshu Patel (JP Morgan):
Could you comment on the earnings outlook for Latin America going forward?
