Ford reports 3Q profit, but automotive business posts big loss

Tuesday, October 19th 2004, 12:23 pm

By: News On 6

DEARBORN, Mich. (AP) _ Buoyed again by strong results at its financial services arm, Ford Motor Co. said Tuesday it swung to a profit of $266 million in the third quarter even though its worldwide automotive operations lost $609 million.

The company also raised its full-year earnings guidance slightly, primarily because of better-than-expected results at Ford Motor Credit Co.

The nation's second-biggest automaker said it earned 15 cents a share in the July-September quarter, compared with a loss of $25 million, or 1 cent a share, a year ago.

Excluding special items, Ford's third-quarter earnings amounted to $537 million, or 28 cents a share, compared with a profit of $278 million, or 15 cents a share, a year ago.

The latest results doubled the consensus estimate of 14 cents from Wall Street analysts surveyed by Thomson First Call.

Third-quarter revenue rose to $39 billion from $36.7 billion.

Don Leclair, Ford's chief financial officer, said the company remained on track to deliver a 2004 milestone of $1 billion in automotive pretax profits, excluding special items.

``Our results show continued strong performance in financial services and continuing improvement in North American revenue, even though the market remains difficult,'' Leclair said.

In afternoon trading on the New York Stock Exchange, Ford shares were down 21 cents to $13.18.

Lower North American vehicle production to offset inflated inventories hampered Ford's automotive business, but overall results were lifted by net income of $734 million at Ford Motor Credit, up from $504 million a year ago and a familiar pattern from previous quarters.

The same was true last week for General Motors Corp., the world's largest automaker, where financial services accounted for the bulk of its $440 million third-quarter profit.

Ford's $609 million automotive loss, excluding special items, was a deterioration of $61 million from a year ago. Special items included a $23 million charge for restructuring at troubled Jaguar and $41 million related to the revaluation of Ford's investment in Ballard Power Systems, a fuel-cell manufacturer.

Worldwide automotive revenue rose to $32.8 billion from $30.2 billion in the same period a year ago.

In North America, Ford's automotive business lost $481 million, excluding special items, compared with a loss of $108 million a year ago. The company said it was hurt by unfavorable exchange rates and lower production. The company also plans lower production in the fourth quarter versus year-ago levels.

Sluggish sales amid heightened competition in the key U.S. market has pulled down results. Ford's U.S. sales for the first nine months of the year were off 5 percent, and the company said its U.S. market share slipped to 17.3 percent in the latest quarter from 18.6 percent in the third quarter of 2003.

Ford officials say they're hopeful to regain some market share in the final months of 2004 as several new vehicles enter the U.S. market, such as the Ford Five-Hundred flagship sedan, the Ford Freestyle crossover vehicle and the Ford Escape Hybrid sport utility vehicle.

Despite intense pricing competition, Ford said its net revenue per vehicle in the third quarter was $22,697, up $423 from a year ago. Net pricing was flat for the quarter, which analysts said was impressive given the aggressive incentives that abound.

``We believe Ford's turnaround is continuing, albeit at a slower rate, given the tough spot it's in between GM's price-cutting and the Japanese (manufacturers') growth,'' Merrill Lynch analyst John Casesa said in a research note.

In South America, Ford posted a pretax profit of $59 million, versus a $26 million loss a year ago. Ford Europe narrowed its loss to $33 million, excluding charges, in contrast to a loss of $400 million in the year-ago quarter.

The company's luxury Premier Automotive Group reported a pretax loss of $171 million, compared with a pretax loss of $24 million a year ago. The decline primarily reflected vehicle-launch costs, particularly at Land Rover, and unfavorable exchange rates.

A big drag on PAG has been Jaguar, where weak sales have failed to offset spending on new products. Ford announced plans last month to streamline the British-based operation, an overhaul that includes cutting 1,150 jobs.

Ford Asia-Pacific reported a $35 million profit, a $32 million improvement from a year ago.

Ford increased its 2004 earnings guidance to a range of $2 to $2.05 a share from continuing operations, excluding special items. That's up from a previous forecast of $1.90 to $2 a share.

The current full-year Wall Street consensus is $2.04 a share.

Ford said special items are likely to reduce full-year earnings by 13 cents a share. They're expected to consist primarily of the restructuring at Jaguar and Ford of Europe and the revaluation at Ballard.

For the first nine months of the year, Ford earned $3.38 billion, or $1.66 a share, up from $1.29 billion, or 68 cents a share, a year ago. Revenue was $126.4 billion versus $118 billion a year earlier.