The Wall Street Journal-20080125-Ford Narrows Quarterly Loss- Says Turnaround Is on Track
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Ford Narrows Quarterly Loss, Says Turnaround Is on Track
Ford Motor Co. posted a loss of $2.75 billion in the fourth quarter, signaling it still has a long way to go in turning around its North American operations and becoming profitable next year.
But the Dearborn, Mich., auto maker's results were an improvement from its year-earlier loss of $5.6 billion. It said it remains confident its turnaround is on track and won't be deterred by the slowing U.S. economy and auto-sales sluggishness.
Chief Financial Officer Don Leclair acknowledged that tougher economic conditions this year mean "there's probably a little less margin" for error. But he said Ford is sticking to its goal of profitability in 2009 because its restructuring effort is "a little ahead of plan."
Mr. Leclair said Ford managed to boost revenue both globally and in the hard-hit North America region, thanks to new models and reduced reliance on discounts. Ford generated $400 million in positive operating cash flow in 2007.
Speaking to reporters in Detroit, Ron Gettelfinger, president of the United Auto Workers union, which closely examined Ford's finances as part of contract talks last year, said he is "confident" Ford is "on target" with its turnaround plan. But he added that he is "not sure" Ford will be back in the black by 2009.
To soften the impact of the slower economy, Ford plans to further reduce costs in North America with two sets of buyout and early- retirement offers. The company aims to cut as many as 11,000 hourly and 2,000 salaried jobs from its payroll, a person familiar with the plan said. Chief Executive Alan Mulally declined to discuss targets for the cuts but said the auto maker has 12,000 workers eligible for retirement who could elect to take a buyout. It remained unclear whether Ford planned to offer salaried workers buyouts or reduce their ranks some other way.
Ford confirmed that the buyout packages aimed at its 54,000 U.S. union workers would be more generous in some instances than those offered in a previous wave in 2006. Retirement-eligible workers stand to get a $50,000 payout, as opposed to the $35,000 lump sum offered before, while skilled-trade employees, such as maintenance workers, can get a $70,000 payout. Ford hopes to replace many of them with new hires earning lower wages under terms of its new labor contract.
Since the end of 2005, Ford has cut operating costs by $2.1 billion and aims to increase that to $5 billion by 2009.
Ford's moves illustrate the challenges domestic auto makers face in resizing their businesses amid a weakening U.S. economy. This year, most observers expect industry-wide sales to fall to fewer than 16 million vehicles, the lowest level in a decade.
Ford's fourth-quarter loss amounted to $1.30 a share, compared with a $2.98-a-share loss a year ago. Revenue rose to $44.5 billion from $40.3 billion.
The quarter included a $2.4 billion write-down related to Ford's Volvo unit. Volvo lost money in 2007, and the company reassessed its value on its balance sheet, Mr. Leclair said. The move is one companies often make before selling an asset, although Ford reiterated it has no plans to sell the brand.
In North America, which accounts for 40% of Ford's revenue, it narrowed its full-year loss to $3.46 billion from a loss of $6.01 billion a year ago. The improvement was largely a result of curtailing sales to less-profitable rental fleets and less discounting.
Ford shares fell four cents to $6.26 at 4 p.m. in New York Stock Exchange composite trading.
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John D. Stoll contributed to this article.
