When Lewis Booth was a boy in Liverpool, England, he pumped gas at his father’s car dealership. It wasn’t as easy as it sounds. “Back then, the pumps told you how much gas you served, but not the price,” he says. “And we had the ha’penny, so you had to calculate in two-gallon units to get to a viable figure.”
These days, Booth is still, in a sense, filling the tank, measuring not in ha’pennies but in billions of dollars in his role as CFO of Ford Motor Co. The company topped off its corporate coffers just ahead of the Great Recession, loading up on $23 billion in debt at a time when credit was cheap. Ford took plenty of heat as critics charged that it was literally mortgaging its future, but the move proved to be, as Booth says, “brave and prescient.”
Prescient indeed. The auto industry was just beginning a slide that would see new-vehicle sales reach a 25-year low, forcing Ford’s Detroit rivals to seek first bailouts and then bankruptcy protection. Ford avoided both, earning plenty of public goodwill in the process even as its significantly refreshed roster of vehicles has racked up enough “Best-ofs” and similar accolades to fill an F-150. Although the company ended 2009 having sold 300,000 fewer vehicles than the year before, it gained market share for the first time since 1995, and its December sales were up by more than 33%, capping a second half in which sales rose for five out of six months. Its stock, meanwhile, is near a five-year high.
Booth can’t take credit for the company’s deep dive into the credit markets; that move was orchestrated in late 2006 by his predecessor, Don Leclair, and newly hired CEO Alan Mulally. But Booth, a 32-year Ford veteran whose career has taken him all over the world, nimbly stepped into the CFO post in late 2008 and continued the company’s relentless focus on working capital throughout 2009. Ford tapped a $10 billion revolving line of credit (a difficult decision made more so by the implosion of one key lender, Lehman Brothers, which caused nearly $1 billion of Ford’s total revolver capacity to disappear), restructured another $10 billion in debt, renegotiated its contract with the United Auto Workers, and raised $1.4 billion in an equity offering. And that was just through May. Later in the year it tapped the equity markets again for $565 million, issued $2.5 billion in convertible bonds, amended and extended its revolver to alleviate a massive repayment scheduled for 2011, and announced that over the next 12 months it will do another $1 billion equity offering.
This fixation on cash would seem to verge on the obsessive, even for a CFO, but Booth points out that Ford’s needs run deep. “The assignment for finance,” he says, “has been to manage cash through this period to ensure that we continue to invest in new products and simultaneously begin to repair the damage to the balance sheet stemming from the big losses we’ve incurred.” The mere fact that Ford can turn its attention to balance-sheet repair may indicate that the worst is over, but there are still, as vice president and treasurer Neil Schloss notes, “a lot of things out there that can derail us, which is why we need liquidity.”