Ford reports quarterly loss of $284 million, plans to announce restructuring in January
Thursday, October 20th 2005, 8:31 pm
By: News On 6
DEARBORN, Mich. (AP) _ Ford Motor Co., its profits dragged down by continuing poor performance in North America, will announce ``significant'' U.S. plant closings and layoffs in January in another heavy blow to the nation's autoworkers. The company reported a third-quarter loss of $284 million on Thursday.
Ford and other U.S. automakers have been hurt by competition from Asia as well as high health care and materials costs and bloated plant capacity. Ford Chairman and CEO Bill Ford said he will complete the restructuring plan in December and announce it in January. He said the plan was painful but essential and would affect salaried workers and hourly workers represented by the United Auto Workers.
``This is not a sacrifice we will ask only the UAW and its members to share. There will be sacrifices throughout the company, top to bottom,'' Bill Ford said in a conference call with investors and media. ``Our industry is beginning a dramatic restructuring which is sorely needed. While the challenges are great, so are the opportunities.''
Ford shares fell 5 cents Thursday to close at $8.42 on the New York Stock Exchange. They have traded in a 52-week range of $8.26 to $15.00.
The nation's second biggest automaker lost 15 cents per share for the three months ended Sept. 30 in contrast to a profit of $266 million, or 15 cents per share, in the year-ago quarter.
Revenue for the quarter rose to $40.9 billion from $39.1 billion in 2004.
Wall Street had predicted a loss of 10 cents per share, according to analysts surveyed by Thomson Financial. Ford said full-year earnings likely will be at the low end of the current guidance of $1 to $1.25 per share.
Standard & Poor's Ratings Services, which downgraded Ford's debt to ``junk'' status earlier this year, said the company would remain on credit watch with negative implications after Thursday's announcement. S&P said it is concerned about Ford's ability to turn around its North American operations, particularly with falling sales of sport utility vehicles, the company's longtime cash cows.
``For all the progress, we recognize we're very far from the finish line,'' Bill Ford said. ``We need a dramatically different business structure and we need innovation to drive everything we do.''
Bill Ford said the Dearborn-based company needs to align its plant capacity with its shrinking U.S. market share, which was at 17.7 percent in the first nine months of 2005 compared to 18.4 percent in 2004. He wouldn't say how many plants need to close, but he said the company will keep enough capacity to meet its future sales goals.
``We are not going to shrink ourselves into oblivion. We think our plans are based upon what's feasible to us,'' Ford said.
Excluding special items, Ford lost $191 million, or 10 cents per share. Special items included a charge of $180 million related to Ford's agreement to take back some unprofitable plants from Visteon Corp., its former parts division, and a charge of $158 million for reduction of employees.
Ford Chief Financial Officer Don LeClair said the company will reduce its staff by 10,000 people worldwide before the end of the year, including cuts of 2,750 U.S. salaried workers. Those reductions will cost the company $700 million this year. The agreement with Visteon will cost Ford between $575 million and $625 million this year, although the company eventually expects to save millions on parts that Visteon supplies.
Bill Ford said last month the company could announce restructuring plans when it released third-quarter earnings. But he said Thursday that he wanted to give his new leadership team a chance to assess the plans. Bill Ford appointed Mark Fields as president of the Americas in September and Anne Stevens was named executive vice president and chief operating officer for the Americas last week.
Bill Ford added that a significant amount of restructuring already has taken place this year, including the closure of a van plant in Lorain, Ohio which employed 1,700 people. Ford also reached an agreement with the Canadian Auto Workers to close a plant in Ontario in 2007 or 2008.
Ford reported a $1.2 billion pretax loss in its North American automotive operations, compared to a $481 million loss a year ago. The automaker said lower dealer inventories, lower net pricing and higher material and warranty costs contributed to the decline.
Ford Motor Credit Co., the company's finance arm, reported a profit of $577 million, down $157 million from a year ago. The decrease was due to higher borrowing costs, the company said.
Ford is the second U.S. automaker to report a loss this week. On Monday, General Motors Corp. said it lost $1.6 billion in the third quarter, or $2.89 per share, compared to a profit of $315 million, or 56 cents a share, a year ago.
GM also announced a tentative agreement with the UAW that would lower the automaker's health care costs by $3 billion a year before taxes and would lower its retiree health care liabilities by $15 billion, or 25 percent. GM's hourly workers still must ratify the deal.
Bill Ford said Ford is already in discussions with the UAW to match that agreement, but he wouldn't give any details about how much Ford could save or when an agreement could be ratified.
``This is just something that's going to take a little time,'' he said. ``We do our negotiations in private. For us that has produced very good results.''
Ford said its worldwide automotive pretax losses were $1.3 billion for the quarter. That is more than double the $609 million loss of a year ago. Worldwide sales were 1.5 million vehicles, up slightly from the year before.
The company's Premier Automotive Group, which includes the Jaguar, Volvo and Land Rover brands, reported a pretax loss of $108 million for the quarter, up from a $171 million loss last year. Ford said the increase was due to a better mix of products and improved pricing at Land Rover.
Ford's European operations reported a pretax loss of $55 million, compared to $33 million a year ago. Ford's Asia-Pacific operations reported a pretax profit of $21 million, a decline from $35 million a year ago.