Autoblog

After months of outrageous oil price spikes, we realize that the shock value of $100 to $105/barrel is fading fast, so we're going to skip ahead to $200/barrel. The finance wizards at Goldman Sachs have raised their outlook for 2008-2012 oil prices by $15 to a high end of $135 per barrel, but a major disruption could make matters much worse. How bad could it get? Goldman Sachs seems to think a spike to $150-$200/barrel is a possibility.

Goldman Sachs correctly predicted in 2005 that oil prices would reach the $50-$105/barrel level, and it thinks there's a chance that prices could drop down again, but inventories would have to rise over a couple years for that to happen. We can hope, but we won't hold our breath.

[Source: MarketWatch]

Oh boy. It looks like the $5.8 billion loss Ford just reported isn't the end of the red ink for the foreseeable future. On Oct. 23, new Ford Motor Co. CEO Alan Mulally had to announce those huge third-quarter losses, the biggest quarterly loss since 1992. The Premier Automotive Group (the luxury group that includes Land Rover, Aston Martin, Jaguar, and Volvo), alone was responsible for $600 million of that loss. Now the company has announced that fourth-quarter earnings will also be dismal due to production cuts, lack of SUV demand, and employee buyouts.

Chief Financial Officer Don Leclaire reassured those in attendance that Ford's cash reserves were adequate to meet the crisis at the meeting on Monday. Although Ford had a negative cash flow of $3.1 billion during the quarter, it finished the period with $23.6 billion. This was partially possible after it transferred $3 billion from their VEBA (Voluntary Employee Benefits Assn.) fund.

Particularly troubling, at least according to Goldman Sachs analyst Robert Barry, were losses from the Ford Premier Auto Group and Ford Motor Credit: "The scale of losses in PAG were worse than expected -- a loss of $593 million vs. our estimates of a $134 million loss. And Ford Motor Credit earnings were well below our expectations -- just $448 million vs. our $710 million estimate." Goldman Sachs had rated Ford a "sell," but just removed that tag today, apparently feeling that the restructuring might make a difference. "We think the focus will remain weighted to restructuring upside," Robert Barry of Goldman Sachs said in a note to clients, after he upgraded Ford shares today to "neutral" from "sell."

It made a difference for Ford stock prices too, as shares were up 4.8 percent to $8.28 in afternoon trading on the New York Stock Exchange. That represents the biggest one-day percentage gain since late August when expectations were high for a turnaround plan by the automaker. That doesn't mean Ford is out of the water just yet, and to his credit, Mulally admitted that Ford's results were "unacceptable" and really didn't try to spin the numbers. After accounting for $2.1 billion of the previous quarter's loss, Mulally said that the sale of Jaguar and Land Rover is again being considered: "Clearly, the review of that is high on my priority list." Aston Martin is still on the block and has had at least three potential buyers step forward. The sale of AM could bring $500-$750 million.

On top of that, Ford is going to have to restate losses all the way back to 2001 as a result of a discrepancy in derivative investment accounting. None of this boosts Wall Street's confidence in the automaker. On the plus side though, Ford saw an unexpected gain from interest on overpaid taxes from as far back as the early 1990s, earnings from its South American operations, and from their share of increased Mazda sales. Mulally also said that Ford has stopped looking for an alliance with another automaker, such as the recently scrubbed Renault-Nissan deal with GM.

[Sources: BusinessWeek and Automotive News, sub req.]

In an effort to firm up its finanaces, General Motors announced today that it has sold a majority interest in GMAC Commercial Holdings Corp. from the company's financing division, GMAC (General Motors Acceptance Corp.).

Word is that GM sold 78-percent of its equity in its Commercial Holding Corp. in exchange for more than $1.5 billion USD -- an increase over the targeted 60-percent interest. More importantly, GMAC Commercial Holding, the company's real estate financing arm will repay around $7.3 billion in intercompany advances to GMAC when the deal is consummated - bringing the value of the transaction to nearly $9 billion.

GMAC Commercial Holding will come to be known as Capmark Financial Group Inc., a decision reached by the investment group, which includes Kohlberg Kravis Roberts & Co., Goldman Sachs Capital Partners, and Five Mile Capital Partners.

(click on through to the jump for the GM-provided press release with full details).

[Source: Associated Press via Fox News, General Motors via PRNewswire]

(Top tip, Dave J!)