Ford May Say Loss Narrowed on Mulally Plant Closings (Update4)
Ford May Say Loss Narrowed on Mulally Plant Closings (Update4)
By Bill Koenig
Jan. 23 (Bloomberg) — Ford Motor Co., the automaker that
lost a record $12.6 billion in 2006, may report a narrower
fourth-quarter loss after Chief Executive Officer Alan Mulally
closed plants and cut jobs in his first full year on the job.
Mulally, a former Boeing Co. executive who took over the
world;s third-biggest automaker in September 2006, also won a
contract with the United Auto Workers that shifts retiree health-
care obligations to a union-run fund and cuts pay for new hires.
Ford;s goal is to post an annual profit next year.
“They;re doing the right things,;; said Mirko Mikelic, who
helps manage $21 billion in fixed-income assets including Ford
debt at Fifth Third Asset Management in Grand Rapids, Michigan.
“They still have a ways to go.;;
Ford lost 24 cents a share last quarter, based on the
average estimate of 15 analysts compiled by Bloomberg, excluding
what the company considers one-time items. Dearborn, Michigan-
based Ford had a loss of $1.10 a share on that basis a year
earlier.
Through three quarters of 2007, Ford had net income of $88
million, or 5 cents a share, compared with a year-earlier net
loss of $6.99 billion, or $3.73. The company trimmed automotive
costs by $4.6 billion while boosting sales by almost $8 billion
in the nine months, according to a U.S. regulatory filing.
Ford reports fourth-quarter results tomorrow before the
start of trading on the New York Stock Exchange.
Passed by Toyota
U.S. sales of Ford;s large pickups and sport-utility
vehicles fell last quarter as gasoline prices stayed near $3 a
gallon, while vehicle demand industrywide declined amid a
weakening housing market and waning consumer confidence.
The company;s decline helped Toyota Motor Corp. move up to
No. 2 in annual U.S. sales, a ranking Ford had held since 1931.
General Motors Corp. is the biggest U.S. automaker.
Ford “is struggling against some serious handicaps, both
internal and external,;; David Healy, an analyst at New York-
based Burnham Securities, wrote in a note yesterday. Still, the
company “has succeeded in bringing itself to approximate
breakeven,;; he said. Healy doesn;t rate its shares.
Automakers including Ford have forecast that industrywide
U.S. sales will fall at least during this year;s first half. Ford
tumbled to a 22-year closing low of $5.76 on Jan. 17 in New York
Stock Exchange composite trading. The company;s shares rose 37
cents, or 6.2 percent, to $6.30 at 4:07 p.m. in New York.
Ford;s 7.45 percent bond due July 2031 rose 0.25 cent to
70.75 cents on the dollar, according to Trace, the bond-price
reporting system of the NASD. The yield was 10.93 percent.
Vote of Confidence
Credit-default swaps on Ford debt fell 25 basis points today
to 960 basis points, according to CMA Datavision in London. The
contracts are designed to protect bondholders against default. An
increase in the price indicates a decline in the perception of a
company;s credit quality.
Ford will adapt its turnaround plan if the economy enters a
recession and “continue to restructure to the real demand,;;
Mulally, 62, said after a Detroit speech yesterday.
“We;re going to have a terrific update;; with tomorrow;s
quarterly results, Mulally said, declining to elaborate.
He received a vote of confidence Jan. 13 from Chairman
William Clay Ford Jr., whose family holds 40 percent voting power
at Ford Motor through its Class B shares. Bill Ford was CEO from
October 2001 until Mulally took over.
“Alan is a great guy who;s gotten great results,;; Bill
Ford said last week at North American International Auto Show in
Detroit. “I haven;t felt better about the company in a number of
years,;; he told reporters.
F-Series Decline
Ford;s fourth-quarter U.S. vehicle sales fell 6.3 percent,
including a 14 percent drop for F-Series pickup trucks, which
account for about a quarter of the total and are one of its main
sources of profits. Industrywide sales declined 1.2 percent.
The North American unit was the main reason for Ford;s 2006
loss and remains Mulally;s primary concern. The automaker relied
on SUVs and big pickups for most of its profits in the 1990s.
U.S. sales of the vehicles fell as gasoline averaged $2.80 a
gallon in 2007, almost doubling from five years earlier. The
average was $3.01 yesterday, according to AAA.
Ford;s mid-size Explorer fell behind Honda Motor Co.;s small
CR-V as the best-selling SUV last year. Explorer sales slid 23
percent from a year earlier to 137,817. In 2002, Ford sold more
than 400,000 Explorers.
Redesigned Trucks
Mulally is relying on a redesigned F-150 pickup and smaller
SUVs such as the Ford Edge and Lincoln MKX to recoup some U.S.
sales. To reduce costs further, he;ll have the four-year contract
reached in November with the United Auto Workers that includes
shedding the retiree medical obligations and lower wages for new
employees.
Ford will contribute $13.6 billion in cash and securities to
the retiree fund while wiping out $23.7 billion in future
obligations. The fund goes into effect in 2010.
The Ford agreement was similar to the union;s accords with
GM and Chrysler LLC. UAW President Ron Gettelfinger, in a Jan. 17
speech, said the contract would save the companies about $1,000
on each U.S.-made vehicle.
“The UAW is helping out where they can,;; Fifth Third;s
Mikelic said. “Still, that may not be enough.;;
To contact the reporter on this story:
Bill Koenig in Southfield, Michigan at
