Ford: Automakers feeling economic pinch

By David Bailey and Scott Malone

DETROIT (Reuters) - The slowing global economy is taking a toll on automakers, and Lehman Brothers Holdings Inc's (LEH.N: Quote, Profile, Research, Stock Buzz) stunning bankruptcy will only give already nervous consumers more to worry about, Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) Chief Executive Alan Mulally said on Monday.

The head of the No. 2 U.S. automaker said he sees no reason to believe overall U.S. auto sales will rebound before late next year or perhaps 2010, but reiterated that the company is confident in its current liquidity.

"We know the situation in the United States, and most people are projecting maybe 1.5 percent GDP growth this year, but clearly it's a slowdown," Mulally told the Reuters Autos Summit in Detroit. "We're seeing a slowdown in Asia Pacific and we're seeing a slowdown in Europe .... That clearly affects the automobile industry worldwide. It's a tough business situation for us worldwide."

Mulally said Ford had not expected the U.S. slowdown to be brief.

"We anticipated about a year and a half ago that the slowdown in the United States would continue, and just as prudent business we decided to go to the markets early and secure the financing that we needed," he said. "We raised not only the amount of money we thought we needed in the near-term for restructuring ... but also an extra amount of money to accommodate a slowdown into the U.S. economy. So our liquidity going into this turned out to be very, very good."

Ford went to the capital markets to borrow more than $23 billion in 2006. It also drew the interest of activist shareholder Kirk Kerkorian, who began to invest actively in Ford shares in April and expressed support for the company's management and turnaround efforts.

Kerkorian, who had made past investments in General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), and an unsuccessful bid for Chrysler LLC CBS.UL last year, had also said he would be willing to support the turnaround with an infusion of additional capital.

Mulally said Ford has not had discussions with Tracinda about an extension of the relationship with Kerkorian, who holds about a 6.5 percent stake in the automaker.

"As we go forward, the most important thing we do is to manage our liquidity, and we will continue to take multiple actions to improve our balance sheet," Mulally said.

Jerry York, an adviser to Kerkorian on the Ford investment, said later at the summit that Ford is the best positioned of the U.S.-based automakers and credited Mulally with bringing a "maniacal" focus to the turnaround.

York declined to comment on Tracinda's investment in Ford.

"I don't want to do anything to second guess them," York said of Ford. "They are doing a terrific job and at the end of the day they will get the job done."

Mulally said Ford has no plans to press its main union, the United Auto Workers, for additional cost-saving measures.

PURSUING GOVERNMENT LOANS

Ford, along with U.S. rivals GM and Chrysler is pursuing a government-funded $25 billion loan that Mulally said would help the automaker to step up its pace of producing more fuel-efficient cars.  Continued...