If there’s a proverbial canary in the economic coal mine, it could be Ford – which has a history of predicting and working through recessions. But other car makers see tough times coming.
Is there an economic storm on our horizon? Some car companies seem to think so, and are doing what they can to protect themselves from financial uncertainty.
According to Cupra CEO Wayne Griffiths, the global economy could be in trouble in 2024, but says his brand – which operates under the Volkswagen Group umbrella – is well positioned for any turmoil.
“The economic environment is going to get tough next year, with inflation and interest rates at the current levels and a recession threat in of the biggest European markets.”
The Cupra boss didn’t share any strategies his company was employing for the future, other than citing strong sales for the brand – which increased 57 per cent globally in the first half of 2023, compared to the same period a year before.
Further afield, Ford’s recent $US9.2 billion loan ($AU14.3 billion) has also raised eyebrows, which it secured from the US Government in order to build new electric vehicle factories and battery facilities – with some claiming this is proof the Blue Oval is positioning itself for an economic downturn.
“Our adjusted [earnings before interest and taxes] guidance includes various headwinds and tailwinds that we believe could impact our business in the coming year,” Ford Chief Financial Officer John Lawler said while speaking on the company’s fourth-quarter earnings call with investors in early 2023, Ford Authority reported at the time.
“For example, headwinds include an expected mild recession in the US, and a moderate recession in Europe,” he said.
While the recent $US9.2 billion is a conditional loan – not a taxpayer-funded bailout – sceptics think Ford may be taking advantage of government funds to ensure it can use its own money to weather any future storm.
It wouldn’t be the first time. While Detroit rivals General Motors and Chrysler received government bailouts during the Global Financial Crisis of 2007 and 2008 – after they both declared bankruptcy – Ford had already secured a large amount of finance which it used to get through the hard times.
Some financial help did eventually come from the US Government, however. In September 2009, Ford borrowed $US5.9 billion ($AU9.19 billion at today’s rates) from the Department of Energy to fund projects designed to improve new-vehicle fuel economy and improve its factories.
“People who follow us closely know Ford’s balance sheet was consciously strong leading up to the pandemic,” Ford spokesperson TR Reid told the Detroit Free Press in July 2020, at the height of the COVID-19 pandemic.
“That cash and liquidity, together with additional cash management and preservation and cost reductions, is why we’re able to both manage through the crisis and strategically invest in Ford’s future,” he said.
“We had financial flexibility in 2008 and have deliberately managed the balance sheet since then so that we’re well prepared for economic downturns.”
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