Ford Motor Co.’s fourth-quarter loss widened to $5.76 billion on plunging truck sales and production, pushing the 103-year-old U.S. automaker to its worst year ever.
The loss was $3.05 a share, compared with $74 million, or 4 cents, a year earlier, Ford said today. Excluding costs the second-biggest U.S. automaker considers one-time items, the loss was $2.08 billion, or $1.10 a share, wider than analysts’ estimates.
The quarter was the first under new Chief Executive Alan Mulally and Ford’s worst fourth-quarter in history. The full-year loss reached $12.75 billion, topping the previous record of $7.39 billion in 1992. Spikes in gasoline prices sent Ford’s sales of light trucks down 15 percent last year, dragging the company to an 11th consecutive year of lost U.S. market share.
“We’re in the first or second inning of a turnaround plan,” said Dan Poole, who helps manage $34 billion, including Ford shares, for National City Corp. in Cleveland. “You aren’t going to see the numbers turn for quite a while yet – we think the second half of 2008 at best.” Ford said today it expects losses will narrow this year without providing an estimate. The Dearborn, Michigan-based automaker had net income of $1.44 billion in 2005 and hasn’t been profitable since the second quarter of that year.
Analysts expected a quarterly loss of 95 cents a share, excluding some costs, the average of 13 estimates compiled by Bloomberg.
Shares of Ford rose 3 cents to $8.23 at 8:35 a.m. before the start of regular New York Stock Exchange composite trading. The stock has declined 43 percent over the past five years.
Deeper Production Cuts Contributing to the loss was a 24 percent production cut in North America, Ford’s biggest market. The company is building fewer autos to reflect lost sales and share, most of it shed to Toyota Motor Corp. Lower output hurts profit because automakers record revenue when they ship vehicles to dealers.
Ford also deepened a planned first-quarter production cut in North America. The company now forecasts it will build 740,000 cars and trucks in the quarter, down from a previous forecast of 750,000.
Ford produced 876,000 vehicles in North America during 2006’s first quarter.
Mulally’s Reality Mulally, 61, a former Boeing Co. executive recruited to Ford in September, wants to revive the company by shedding jobs and investing in new models.
“We fully recognize our business reality and are dealing with it,” Mulally said in a statement today.
Mulally also hopes to wean Ford from dependence on light trucks such as pickups and sport-utility vehicles, which accounted for 62 percent of 2006 U.S. sales. Overall U.S. vehicle sales, including passenger cars, fell 8 percent for the year as higher gasoline prices damped demand for F-Series pickups and Explorer SUVs.
Ford said that one-time costs “are expected to be significantly lower than in 2006.” Ford doesn’t expect its North American operations, the main reason for losses, to be profitable until 2009. The automaker borrowed $23.4 billion last month to withstand a $17 billion cash drain over the next three years.
Regional Results Ford’s worldwide auto operations had a pretax loss of $2.5 billion in the quarter, widening from $109 million a year earlier. The North American auto unit had a pretax loss of $2.8 billion compared with a $217 million loss in 2005’s final quarter.
The North American unit had a pretax loss of $6.1 billion for 2006.
Other company auto units posted a quarterly profit, including Ford of Europe with $232 million, an increase from $24 million a year earlier; South America with $114 million, down from $131 million in the same period in 2005; and Premier Automotive Group, with a pretax profit of $191 million.
Premier, comprised of European-based luxury brands, had a full-year pretax loss of $327 million, because of losses at the U.K.-based Jaguar unit. Premier includes Volvo, Land Rover and Aston Martin. The Aston Martin unit is for sale.
The company also had $3.77 billion in quarterly pretax costs for job-cutting and other expenses Ford considers one-time items. That included $1.91 billion in pretax costs related to job cuts in North America, $1.4 billion in pension-related costs and $421 million in pretax costs for job cutting outside of North America.
Ford Motor Credit Co., the unit that makes loans to buyers of Ford-manufactured cars and trucks, said net income fell to $279 million from $305 million a year earlier. The unit’s profits in 2006 were overwhelmed by losses in auto operations. In 2005, Ford Credit kept the parent company profitable.
Bonds, Swaps Ford’s 7.45 percent note due July 2031 rose 0.125 cent to 82 cents on the dollar yesterday, according to Trace, the NASD’s bond-price reporting system. The yield fell to 9.33 percent.
The perceived risk of owning Ford bonds fell today, according to traders in the credit-default swap market who bet on corporate creditworthiness. Credit-default swaps on $10 million of Ford bonds dropped 4.3 percent to $450,000 from $470,000, according to Deutsche Bank AG. A decline indicates improvement in the perception of credit quality.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. A decrease in price indicates improvement in the perception of credit quality. An increase suggests deterioration.
Job-cutting efforts continued last quarter as the company completed buyout offers of as much as $140,000 to all of its U.S.
factory workers. About 30,000 accepted in addition to 8,000 who agreed to buyouts earlier last year.
At the start of 2006, Ford had about 83,000 employees represented by the United Auto Workers.
Ford said in mid-September it was accelerating job cuts and plant closings. The automaker plans to cut 10,000 salaried jobs, or about one-third, by the end of this quarter.
The company now expects to shut nine North American factories by next year and seven more by 2012. Facilities closed so far include the Atlanta plant that made the now-discontinued Taurus sedan, once the best-selling car in the U.S.
