Ford Motor Co., the second-biggest U.S. automaker, restated five years of earnings to correct accounting for derivative transactions, adding a total of $850 million to net income since 2001.
Restatements reduced profits from 2003 through 2005 and improved results in the two previous years, Ford said today in a regulatory filing. The loss for the first nine months of 2006 was revised to $6.99 billion, a $250 million improvement from preliminary figures announced last month.
Ford’s filing brings its accounting up to date and allows new Chief Executive Officer Alan Mulally to focus on the automaker’s operations. The company is working to revive profit by stabilizing sales and its U.S. market share.
“It’s good to know the history, but it doesn’t change the situation for Mulally,” said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. “The operational problems are still there. They still aren’t selling enough cars and trucks and they aren’t doing it profitably.” Ford narrowed its third-quarter 2006 loss to $5.25 billion today from the $5.8 billion first reported. The company also plans to amend filings for 2006’s first and second quarters by Nov. 20, Chief Financial Officer Don Leclair said.
Ford’s shares fell 5 cents to $8.82 at 1:44 p.m. in New York Stock Exchange composite trading. They have gained 14 percent this year.
Today’s filing originally was due Nov. 9. Ford said then more time was needed to review accounting.
North American Profit Ford’s North American auto unit, which has posted eight losses in the past nine quarters, will report a small profit in 2009, Leclair reiterated today. Ford plans to save money by cutting as many as 44,000 hourly and salaried jobs in the region by 2008 and closing as many as 16 factories by 2012.
“We’re not going to be committing to a large profit level right now” in 2009, Leclair said during a conference call with analysts. The finance chief also said today that U.S. auto sales may decline next year because of slowing economic growth.
The accounting changes involve the use of derivatives by Ford Motor Credit, the finance arm of the Dearborn, Michigan- based automaker. Ford Credit didn’t follow accounting standards when using derivatives to hedge the interest-rate risk from longer-term debt, Ford said last month.
Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in interest rates.
Year-by-Year In the restated figures, Ford had a $1.44 billion profit for 2005, from the originally reported $2.02 billion; a profit of $3.04 billion for 2004 from the originally reported $3.49 billion; and a profit of $239 million for 2003 from an originally reported $495 million.
Ford now is reporting a profit of $875 million for 2002, compared with a loss of $980 million before the restatement.
The company narrowed its 2001 deficit to $4.79 billion $5.45 billion.
“When you look at the more recent periods, the performance is actually worse,” Argus Research analyst Kevin Tynan said in an interview, referring to 2003 through 2005. Ford “didn’t have the traction it had originally.” Ford also said today that some employee-benefit expenses, marketing costs and financial services sales were recorded in the wrong quarters. As a result, Ford adjusted when those items were recorded.
“It’s surprising that the clean-up involved so many line items,” Hastings said. “I was expecting it to be about derivatives and we have line items about the marketing of cars and the employee benefits.” Mulally Former Boeing Co.
executive Mulally, 61, succeeded Chairman William Clay Ford Jr. as chief executive effective Sept. 1. Bill Ford, 49, was CEO from October 2001 until Mulally took over.
Ford said last month it expects a cash drain “for the near to medium term” on automotive losses and job-cutting costs. Ford will finish setting up a new line of credit backed by company assets “reasonably soon,” Leclair said today.
Ford’s 7.45 percent note due in 2031 rose about a quarter cent today to 80.25 cents on the dollar, yielding 9.5 percent, according to Trace, the NASD’s bond-price reporting service.
Competition from Japanese carmakers including Toyota Motor Corp. is also causing Ford to lose market share in the U.S.
Toyota sold more cars and light trucks in the country than Ford in July, a first for any month. Ford’s U.S. sales have fallen 7.4 percent this year through October, while Toyota’s have risen 12.2 percent.
