Sales of vehicles sold in China by Ford (F) and its partners rose 21% in the first half to 172,411, according to Reuters. That sounds good, and, to some extent, it is.
Ford sold about the same number of cars in the US in June as its did in China during the January through June period. Unfortunately, the carmaker’s unit sales here were down 28% last month. That means over a six month period, Ford is losing about 700,000 vehicle sales in America, while it adds about 50,000 in China.
The China versus US math will not work for Ford. The imbalance between loss and gain is too great. But, it does give Ford an unusual opportunity, especially since the company will almost certainly have to raise money to support its cash burn rate in the US.
Ford may well be able to sell an interest in its China operations. It may even be able to get money for a piece of its entire overseas business.
Because China is growing so fast, Ford may find getting a minority holder and some capital will be easiest if it focuses on spinning off its mainland operation. The total value of Ford China sales is now probably $1 billion this year growing to $1.25 billion next year.
Ford may not be able to raise money at any reasonable rate by having the borrower be The Ford Motor Company. The risks for putting capital into that parent entity would be high so the interest rates would be usurious.
Ford China is another matter.
Douglas A. McIntyre
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