Ford Says 4thQuarter Loss Narrowed to 2.75 Billion (Update6)
Ford Says 4th-Quarter Loss Narrowed to $2.75 Billion (Update6)
By Bill Koenig
Jan. 24 (Bloomberg) — Ford Motor Co., the second-largest
U.S. automaker, cut its fourth-quarter loss by 51 percent,
beating estimates, after closing plants and slashing jobs in
North America.
The loss fell to $2.75 billion as Dearborn, Michigan-based
Ford benefited from rising auto sales in Europe and South
America. After trimming 35 percent of its North American
workforce to 88,000 in the past two years, Ford said it will
offer buyouts to all U.S. factory workers.
The quarterly results helped Chief Executive Officer Alan
Mulally pare Ford;s annual loss by 79 percent from a year-earlier
record. Mulally said the deficit will shrink again in 2008. The
automaker has shut or is scheduled to close 10 North American
plants following $15.3 billion in losses since 2005 and 12 years
of declining sales in the U.S.
“They still have probably another year of pain in terms of
the restructuring and trying to maintain their market share,;;
Mirko Mikelic, who helps manage $21 billion in fixed-income
assets for Fifth Third Asset Management in Grand Rapids,
Michigan, said today in an interview on Bloomberg Radio.
A slowing U.S. economy may hamper Ford;s projected return to
profitability next year, as forecasters say demand for new autos
will fall to a 10-year low in 2008.
Ford;s fourth-quarter loss of $1.30 a share compared with a
deficit of $5.63 billion, or $2.98, a year earlier. Revenue
climbed 9.4 percent to $44.1 billion.
Shares, Bonds
Ford declined 4 cents to $6.26 at 4 p.m. in New York Stock
Exchange composite trading and is down 24 percent for the past 12
months.
The company;s 7.45 percent bond due July 2031 rose 1.5 cents
to 73 cents on the dollar, according to Trace, the bond-price
reporting system of the NASD. The yield was 10.6 percent.
The loss was Ford;s ninth in the past 10 quarters. Excluding
costs the company considers one-time, the deficit was $429
million, or 20 cents a share. On that basis, analysts expected a
loss of 24 cents, the average of 13 estimates compiled by
Bloomberg.
Ford began offering buyouts to United Auto Workers members
at some already closed U.S. plants this week, Mulally said on a
conference call. All factory workers can elect to accept offers
starting next month, Mulally, 62, said.
Eight Plans
Ford will have eight buyout plans, similar to earlier
buyouts. Under one of them, for workers who are eligible to
retire, the retirement incentive is being increased to $50,000
for non-skilled employees and $70,000 for skilled-trades
employees, spokeswoman Marcey Evans said in an e-mail. In the
previous round of buyouts, the offer was $35,000. Ford has about
12,000 U.S. factory workers eligible to retire.
Mulally, on the conference call, declined to discuss Ford;s
target for buyouts. Ford has about 54,000 U.S. factory workers.
Ford also plans to cut North American jobs by not replacing
employees who quit or retire, Mulally said. The company will
“selectively;; pare jobs beyond attrition, the executive said.
Mulally said Ford hasn;t decided whether those cuts will be made
through buyouts or firings.
The automaker;s annual loss dropped to $2.67 billion, from a
record $12.6 billion the year before. Mulally told reporters
after a speech two days ago that “we;re going to have a terrific
update;; today.
One Time
The fourth-quarter results included a series of what Ford
called one-time costs and gains. The largest was a $2.4 billion
pretax writedown of assets for the Sweden-based Volvo luxury-car
unit.
Chief Financial Officer Don Leclair said on the conference
call with Mulally that Volvo broke even in the fourth quarter
while recording a deficit for the year. He didn;t provide
figures.
The company said in November that it;s keeping Volvo while
moving to sell its U.K.-based Jaguar and Land Rover luxury units.
Ford is negotiating with India;s Tata Motors Ltd. on that deal.
Also included was a $1.37 billion pretax cost related to
accounting for incentives to dealers. The move caused Ford to
reduce its reported quarterly revenue. Without the change, Ford
would have reported $45.5 billion in revenue.
Regional Results
Ford;s worldwide automotive operations narrowed its fourth-
quarter pretax loss by 62 percent to $889 million.
The North American unit, the company;s top priority, saw its
pretax loss decline 43 percent to $1.6 billion from the same
period in 2006. In South America, pretax profit more than tripled
to $418 million.
Ford of Europe said its pretax profit rose 2.3 percent to
$223 million. Pretax profit at the Premier Automotive Group,
comprised of Jaguar, Land Rover and Volvo, slid 66 percent to a
$59 million because of the Volvo results.
The company;s Asia Pacific and Africa unit had a pretax
profit of $10 million compared with a pretax loss of $135 million
a year ago, helped by increased sales in China.
Ford Motor Credit Co.;s net income fell by a third to $186
million in the fourth quarter from 2006;s final quarter.
Mulally, hired from aircraft maker Boeing Co. in September
2006, told Bloomberg Television today that Ford is watching the
economy while still committed to returning to profit in 2009.
Ford last year had buyouts and early retirements for 33,600
U.S. factory workers. Ford also trimmed about 10,000 salaried
jobs in 2007.
The automaker reached a new four-year labor agreement with
the United Auto Workers in November, allowing Ford to pay less
for new hires and unload future retiree health-care obligations
to a new union fund. Those changes had little, if any, effect on
Ford;s fourth-quarter results. The union fund goes into effect in
2010.
The Edge
The company is relying on new models such as the Edge
“crossover;; wagon to boost sales. Rising gasoline prices have
prompted U.S. shoppers to turn away from traditional sport-
utility vehicles, such as the Ford Explorer.
Ford sold 130,125 Edges in the U.S. in 2007, the model;s
first full year, about 30 percent more than it projected.
Credit-default swaps on Ford debt fell 61 basis points today
to 899 basis points, according to CMA Datavision in London. The
contracts are designed to protect bondholders against default. A
decrease in the price indicates a rise in the perception of a
company;s credit quality.
To contact the reporter on this story:
Bill Koenig in Dearborn, Michigan, at
