Ford Motor Company has amassed a $28 billion cash pile, which the company has no particular desire to spend on stock buybacks or big investments, Bloomberg reports. That’s about $8 billion more than rival General Motors has on hand, and Ford’s reluctance to use the capital has drawn criticism from analysts.
The $28 billion stockpile is enough to guarantee a steady dividend, and “gives us a bit more flexibility when a downturn does occur and more flexibility to continue to invest in the business and transform the business,” says Ford CFO Bob Shanks. It’s about 40 percent more than the minimum $20 billion executives say should be on hand to weather another recession.
But data compiled by Bloomberg shows that just five notable Wall Street analysts currently recommend buying Ford shares, down from nine last May, when Ford CEO Jim Hackett took office. Nineteen analysts rate Ford a “hold”, and two a “sell”.
It’s possible Ford is operating with an abundance of caution, still shaken by the 2007-’08 financial crisis that saw both its major American competitors file for bankruptcy. Ford itself smartly borrowed $23 billion early, in 2006, giving the automaker a total of $37 billion within the next year to invest in new product.
“We have not forgotten what happened 10 years ago,” Shanks says. The company doesn’t expect anything like 2007-’08 to reoccur anytime soon, but “we feel we are OK with where we’re at in terms of the cash balance we have.”