Ford posts biggest loss in 14 years
DETROIT – Ford Motor Co. on Monday posted a quarterly loss of $5.8 billion — its largest loss in 14 years — as slower truck sales, charges for job cuts and asset write-downs in its troubled North American operations and elsewhere took their toll on the No. 2 U.S. automaker.
Ford said it would restate results from 2001 through the second quarter and cautioned that operating results would weaken further in the current quarter.
Ford also said it was considering raising new funding secured by its automotive assets in order to protect its cash position as it pays the bill to close 16 plants and cut up to 45,000 jobs.
“These business results are clearly unacceptable,” said Chief Executive Alan Mulally, who took over at Ford in early September.
Ford posted a net loss of $3.08 per share for the third quarter compared with a loss of $284 million, or 15 cents per share, a year earlier. That included a battery of charges that totaled $4.6 billion after taxes, or $2.46 per share.
Ford’s loss from continuing operations was 62 cents per share, matching analysts’ average forecast as tracked by Reuters Estimates.
Analysts have urged Mulally to consider further asset sales to protect Ford’s cash position, and in his first post-earnings conference call with analysts some credited him with a more open approach to the company’s turnaround.
“One of the things that’s positive about Mulally coming in is that nothing is sacred and he is willing to take a fresh look,” said Morningstar analyst John Novak.
Said Argus Research analyst Kevin Tynan: “Simply shrinking again is not necessarily the answer. Ford needs to become a company flexible enough to be profitable at lower production volumes on each line (and) on each platform.”
REVENUE DOWN, CASH IN FOCUS
Revenue for the quarter was $36.7 billion, down $4.1 billion. Auto sales accounted for $32.6 billion of total revenue.
High gasoline prices have caused U.S. consumers to shift away from sport utility vehicles and pickup trucks, a segment that represents over 60 percent of Ford’s current sales.
Ford ended the quarter with cash of $23.6 billion but said that total would drop near $20 billion by the end of the year as it restructures.
Fitch Ratings, which placed Ford’s debt on watch for a downgrade on Monday, said the automaker needed to hold at least $15 billion in consolidated cash in order to avoid raising concern among suppliers and customers.
Chief Financial Officer Don Leclair said Ford was “exploring various financing strategies, including secured financing involving a substantial portion” of its automotive operations.
Ford is selling its British luxury brand Aston Martin. Leclair said the company is in the process of preparing a short list of bidders but does not expect to close a sale this year.
Mulally also said Ford is open to reviewing its other luxury brands — leaving the door open to a potential sale of Jaguar, Volvo or Land Rover.
“I really think it’s going to hinge on how the businesses are doing and can we make profitable growth businesses out of them with the action we have taken and additional actions that might be required,” he said.
BUYOUTS ON THE TABLE
Ford is offering buyouts to all of its 75,000 unionized workers in a bid to reduce its factory work force by nearly half. The bulk of hourly workers taking buyouts to leave the company in the first and second quarter of 2007.
About 4,000 employees at former Visteon Corp.(NYSE:VC – news) factories, now grouped under Automotive Component Holdings, have already accepted buyouts, the company said.
In the third quarter, Ford took pretax charges of $861 million for job cuts related to plant closings in North America, $259 million for job cuts elsewhere, and $437 million to pay out pensions earlier than planned .
Ford also took pretax charges of $2.2 billion to write down the value of North American assets and $1.6 billion for the impairment of Jaguar and Land Rover assets.
Ford Motor Credit’s net profit fell to $262 million from $577 million a year earlier in part because of higher financing costs driven by the parent company’s junk credit rating.
“The reduced profitability at Ford Motor Credit now shines a more intense light on the weakness of Ford’s fundamental operation — the automotive business,” Tynan said.
Ford executives repeated that the company has no plans to sell its finance arm, although Leclair said the automaker would be open to partnerships in some markets.
Shares of Ford were down 14 cents or 1.8 percent to $7.87 in early afternoon trade on the New York Stock Exchange.