Thursday, October 05, 2006


The WSJ’s „Heard on the Street” column discusses Ford (F), saying that as the co attempts another turnaround, one item drawing particular scrutiny is the auto maker's tightening cash situation, which has already forced the co to eliminate its dividend and could prompt asset sales or other moves in the near future. Ford is starting its latest restructuring with a sizable cash cushion, roughly $23bn, down from $25bn at the start of ‘06 and will likely keep declining for the rest of this year and next. Analysts and ratings firms say the cost of shrinking Ford is growing as the auto maker ponies up severance packages, early-retirement offers and buyout plans in an attempt to eliminate about 44K workers. Ford CFO Don Leclair says the co's gross auto cash position will drop by year's end to about $20bn. The restructuring costs, combined with massive vehicle-production cuts and expected and ever-increasing quarterly losses, will keep eating away at Ford's cash, making asset sales of brands like Jaguar or Land Rover, or even Ford Motor Credit, more inevitable, say analysts. "In going through a turnaround like this, it is clear Ford will consume a lot of cash in ‘06 and ‘07. They will use a lot of cash before the plan kicks in," said Bruce Clark, senior vice president at Moody's Investors Service. "Well, if it doesn't begin to take, they will still be burning cash, and if they need another one of these, they won't have the financial cushion any longer. They simply have to get it right this time," Mr. Clark said.

Barron’s Online discusses Carnival (CCL), whose stock is up nearly 33% from a 52w low in June. The stock has been bid up by investors attracted by a low valuation, the recent drop in oil prices and a relatively uneventful hurricane season. Certainly, Carnival and its stock still face possible headwinds with talk of a slowing US economy that some analysts fear could turn into a recession next year. Yet with profits set to start climbing again in ‘07, the stock still has room to travel. "Anyone with a 12-24 month horizon can make money," says Chris Scheuer, senior analyst with Thrivent Investment Mgmt, citing Carnival's predictable top-line growth, attractive margins and good ROIC. "Carnival is also buying back stock and raising its dividend," Scheuer says. "And that's a nice combination." Adds Tim Fidler, of Ariel Capital Mgmt, "This is a world class co with a low valuation."

“Inside Scoop” section reports that three Goldman Sachs (GS) insiders including its CFO, have started taking profits from the stock in recent weeks as it climbed to new all-time highs. Goldman CFO David A. Viniar, EVP Kevin W. Kennedy, and James Johnson, a director, have sold a total of $17.7m in stock since Sept. 13. Ben Silverman, of, says that insiders have been accurate in spotting short-term price retrenchments in Goldman Sachs' share price with their past sells.

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