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Ford shares dive below $10


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Ford shares dive below $10

Sales and trust fund payment are concerns



Ford shares closed at $9.88 on Tuesday -- their lowest point since Dec. 21 -- amid concerns about sluggish industry sales and uncertainty over how the company will pay what it owes to the UAW's health care trust fund.

The automaker's 5.3% decline for the day exceeded a 2.7%, or 268-point, decline for the Dow Jones Industrial Average as investors worried about the pace of the economic recovery.

Ford is required to pay $860 million today to meet its obligations to the UAW's Retiree Medical Benefits Trust. Ford must pay the first $250 million in cash but can pay the remaining $610 million either with cash or by issuing stock. But the more stock Ford issues, the more it dilutes the value of its shares.

Ford spokesman John Stoll declined to comment on Ford's payment plans.

However, the bigger concern among investors is the slowly recovering economy and lackluster U.S. auto sales, 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. "They've been pretty terrible."

On Thursday, automakers are to report U.S. car and truck sales for June. While sales are expected to increase from a year ago, they aren't expected to show as much strength as they did in May.

Industrywide, analysts say they are expecting a seasonally adjusted annual rate of 10.9 million to 11.2 million. That would be down from 11.6 million in May.

The seasonally adjusted annual rate, or SAAR, indicates what sales would total for the year if demand remained constant over 12 months, adjusting for seasonal factors.

"We could be hanging around in this low SAAR area for awhile," Mikelic said.

Ford's stock has dropped by $4.69 per share, or 32%, since April 26 -- the day before it reported a $2.1-billion first-quarter profit and signaled that quarterly profits for the rest of the year could be smaller.



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