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Ford stock drops on sales estimates

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Ford stock drops on sales estimates

BY BRENT SNAVELY

FREE PRESS BUSINESS WRITER

Ford’s stock price fell to its lowest level since Dec. 22 during mid-day trading today following reports that industry sales were sluggish in June and as the company faces a Wednesday deadline to make an $860 million payment to a UAW retiree trust fund.

Ford’s stock traded as low as $9.82 mid-day.

The automaker is required to pay the UAW’s Retiree Medical Benefits Trust by Wednesday to fund health care benefits for former hourly workers.

Ford must pay $250 million of the required payment in cash and can pay as much $610 million in stock.

Bloomberg News reported on Monday that Ford might issue stock to make the payment so it can use cash to better manage its balance sheet. In the past, Ford shareholders have been concerned about additional stock diluting the company’s stock.

“We do not run our business based on day-to-day stock changes,” said Ford spokesman John Stoll.

But Ford’s falling stock price probably has little to do with how it will meet the trust fund payment obligation, said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids.

“It’s really less of a Ford issue than just the economic numbers that are coming out,” Mikelic said. “In the last few weeks they’ve been pretty terrible in terms of employment, new home sales, consumer confidence, and gross domestic product.”

In fact, Ford’s stock has been steadily declining since April, when it reported a $2.1 billion quarterly profit but signaled that quarterly profits for the remainder of the year might be smaller.

Ford’s stock hit a trading high for the year of $14.57 on April 26 and has dropped by $4.62 per share, or 32%, since then.

Ford, which has gained 1.7 points of market share in the U.S. through May, is expected to continue to overtake Toyota in total sales as the second largest seller of cars and trucks in the U.S. for the first six months of the year.

In April, Ford said it would be “solidly profitable” for the year, putting it one year ahead of its earlier turnaround plan.

But Ford continues to deal with $34.3 billion in debt while its domestic competitors General Motors and Chrysler were able to eliminate their debt through bankruptcy last year.

Industry sales in June are expected to decline from May, signaling a weaker recovery in U.S. automotive sales than previously expected. Automakers are scheduled to report U.S. car and truck sales for June on Thursday.

Industrywide, analysts are expecting June’s seasonally adjusted annualized rate to come in between 10.9 million and Edmund’s forecast of 11.2 million. That would be down from 11.6 million in May 2010 but up from 9.7 million for the same month last year.

The seasonally adjusted annual sales rate, or SAAR, indicates what sales would total for the year if demand remained constant over 12 months, adjusting for seasonal factors. Before the recession, a SAAR of 16 million or more was common.

“We could be hanging around in this low SAAR area for awhile…maybe even for the next couple of quarters,” Mikelic said.

link:

http://www.freep.com/article/20100629/BUSINESS01/100629022/1210/Ford-stock-drops-on-sales-estimates

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