Ford expects changes, buyouts will equal profit in 2009
DETROIT -- As the auto industry peers into a tough year, marked by a weak consumer appetite for big-ticket items such as cars, Ford Motor f says it's still on track to meet its goal to make a profit, even if it's just a small one, in 2009.
That's because Ford continues to push its strategy of matching production with actual consumer demand, "which is new for many automakers," Ford CEO Alan Mulally says. What it means is that if sales fall this year, so will production. In the past, Ford and other automakers tried to push through bad times by continuing to manufacture cars and trucks and encouraging consumers to buy by offering hefty discounts.
"Although our automotive operations are improving on a year-over-year basis, the U.S. economy is slowing, and the outlook for the auto industry remains challenging," Mulally said on a conference call to discuss fourth-quarter results.
Plans for this year include a new round of buyouts, being offered to every one of Ford's 54,000 United Auto Workers-represented employees. That doesn't mean Ford plans to eliminate all its hourly workforce — the automaker knows how many jobs it wants to cut, but won't make that number public.
On Thursday, Ford reported it lost $2.7 billion in 2007, compared with a $12.6 billion loss for 2006.
"While there's significant improvement, the year-ago numbers were so cartoonish, it's hard to put in context," says Kevin Tynan, an analyst at Argus Research.
A big step in reaching the company's 2009 goal will be further cost cutting, including the new buyouts, which should take effect in the second quarter.
There are about 12,000 hourly workers who are eligible to retire. Ford won't say if it wants all those workers to leave, but ushering a substantial number of them out the door would help the bottom line.
That's because the new labor agreement with the UAW allows Ford to hire new workers at much lower wages. Older workers make about $70 an hour, including benefits, but the new class of workers will earn about $40 an hour, with benefits.
Cutting labor is key to getting costs in line for the domestic automakers.
Last year, Ford trimmed 32,800 jobs in North America. Chrysler will cut 10,000 jobs this quarter, and General Motors gm is offering buyouts to 46,000 of its workers.
Ford may also trim its salaried workforce, Mulally says. He also would not rule out further plant closures.
A closer look at Ford's earnings:
Ford lost $1.30 a share in the fourth quarter, narrower than a loss of $5.6 billion, or $2.98 a share, in the year-earlier quarter. The full-year results, which resulted in a loss of $1.35 a share, were significantly better than 2006, when Ford lost $12.6 billion, or $6.72 a share.
Ford reported revenue of $44.1 billion for the fourth quarter, up from $40.3 billion. The company reported full-year revenue of $172.5 billion, up from $160.1 billion.
Excluding special items, Ford lost 20 cents a share for the quarter and 19 cents a share for the year, in line with Wall Street's expectations. Analysts surveyed by Thomson Financial had predicted a loss of 19 cents a share for the quarter and 17 cents a share for the year.
Special items for the year included a $705 million charge for separation programs in North America and a $208 million gain from the sale of Aston Martin.
Ford lost $3.5 billion for the year in its North American automotive operations, narrower than a loss of $6 billion in 2006. Ford said higher net pricing and lower costs helped offset losses from lower sales and unfavorable exchange rates. Full-year revenue for the region was $70.5 billion, up from $69.4 billion a year ago.
In the fourth quarter, Ford lost $1.6 billion in North America, compared with a loss of $2.7 billion in the year-ago quarter. Fourth-quarter revenue was $17 billion, up from $15.1 billion a year ago. Ford took a hit in the U.S. in 2007 when it reduced low-profit sales to rental-car fleets by a third.
Ford reported a full-year profit of $997 million in Europe, more than double its 2006 profit of $455 million. Ford said the improvement was due to continued cost reductions, higher net pricing and higher sales. Full-year European revenue was $36.5 billion, up from $30.4 billion in 2006. Ford reported a fourth-quarter profit of $223 million on revenue of $10.4 billion in Europe, up slightly from $218 million on revenue of $8.8 billion a year ago.
Earnings also more than doubled in South America, where Ford had a full-year profit of $1.2 billion, up from $551 million a year ago. Full-year revenue improved to $7.6 billion from $5.7 billion a year ago. For the quarter, Ford posted a profit of $418 million in the region, up from $114 million a year ago, and revenue of $2.4 billion, double its 2006 revenue.
Ford's Premier Automotive Group, which includes the luxury Jaguar, Land Rover and Volvo brands, posted a full-year profit of $504 million, compared with a loss of $344 million a year ago. Ford said it reduced costs across all brands and saw higher sales and higher net pricing at Land Rover. Full-year revenue for the brands was $33.2 billion, up from $30.0 billion in 2006.
Ford doesn't break out results for its luxury brands, but said Volvo incurred a loss for the year. Ford recently decided to keep Volvo but is planning to sell Jaguar and Land Rover. Earlier this month, Ford selected Indian carmaker Tata Motors as the top bidder for the two British brands.
The luxury brands posted a $59 million profit for the fourth quarter, compared with a profit of $174 million in the year-ago quarter. Ford said the decline was explained by adverse currency exchange rates and product mix at Volvo, which broke even for the quarter, while Jaguar and Land Rover made a profit. Revenue for the unit was $9 billion for the quarter, up from $8.6 billion a year ago.
Ford's credit division, Ford Motor Credit, posted a $775 million profit for the year, down from $1.3 billion a year ago as it was hit by higher borrowing costs, higher depreciation expenses for leased vehicles and other factors.
Contributing: The Associated Press