Ford reports record $14.6B loss
02-01-2009, 06:20 AM
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Ford reports record $14.6B loss
Ford Motor Co. today posted a record loss of nearly $14.6 billion for 2008 and reported a fourth-quarter net loss of $5.9 billion.
That was worse than Wall Street was expecting, but the company insisted that it has sufficient liquidity to weather the current economic crisis and does not need government aid.
“We faced nearly unprecedented challenges in our global markets,” CEO Alan Mulally told reporters and analysts during a conference call this morning. “The severe economic challenges had a significant impact on our fourth-quarter results.”
Ford’s full-year after-tax loss from continuing operations was just over $7.1 billion, translating into a loss of $3.13 per share. Its fourth quarter after-tax loss from continuing operations, excluding special items, was $3.3 billion, or $1.37 per share, compared with a loss of $487 million, or 23 cents per share, a year ago. Analysts had been expecting a loss of $1.30 per share, according to a survey by Thomson Reuters.
More troubling was the fact that Ford burned through $5.5 billion in cash during the last three months of 2008. That was better than the $7.7 billion the company burned through in the third quarter, but more than analysts were hoping for.
Still, Ford’s automotive operations finished the year with $24 billion in available liquidity, including $13.4 billion in gross cash.
Ford to draw down revolver
The Dearborn automaker also said it would draw down its $10.1 billion credit revolver, but Chief Financial Officer Lewis Booth told reporters that it did not intend to use that money to fund operations, nor was it required to maintain minimum cash levels. Rather, he said Ford decided to put that money on its own books now because of the “uncertainty” in the financial markets.
Ford lost about $800 million in available credit when Lehman Bros. collapsed last year.
Ford stressed that it expects to significantly reduce its cash burn rate this year, despite a dismal economic outlook. It will save billions compared to last year by deferring payments to a union-run trust for retiree healthcare and operating cost reductions announced last fall.
It also will cut 1,200 jobs at Ford Credit to further reduce operating costs in its consumer lending arm and announced that it had reached an agreement with the United Auto Workers to end to the controversial jobs bank program, which continues to pay idled factory workers.
Ford is alone among U.S. automakers in not asking the federal government for financial aid, though it warned that it too could ask Washington for loans if car and truck sales continue to deteriorate.
Ford’s sales plunged 20.5 percent last year, surpassing the industry slide of 18 percent. They were down nearly 32.3 percent in December, better than the industry drop in December of 35.6 percent, according to Autodata Corp. Ford expects results to be down sharply into this year.
Because Ford has not asked the federal government for money, it is not bound by the same restrictions imposed on rivals General Motors Corp. and Chrysler LLC by the White House in December, both of which are mandated to seek significant concessions from bondholders, suppliers and the UAW.
Ford hopes to negotiate some of the same deals.
Ford is in the midst of its latest round of white-collar layoffs, which aims to cut Ford’s U.S. salaried payroll by another 10 percent.
The automaker has eliminated more than 13,000 salaried positions and more than 43,500 hourly jobs in North America since the end of 2005.
“In response to these challenges, we took decisive actions,” Mulally said.
North America did better than expected
There was some reason for hope in Ford’s financial results, analysts said.
Its fourth quarter pre-tax loss for North American automotive operations was $1.9 billion, just $400 million more than the company reported for the same period in 2007.
Analysts had been expecting a much sharper decline, given Ford’s dramatic drop in U.S. sales. Fourth quarter revenue was $11.3 billion, down from $17.3 billion a year ago. That means Ford realized significant gains from its North American cost-cutting efforts during the quarter.
“Profits were largely in line — better North America on costs, weaker internationally,” said analyst Himanshu Patel of JPMorgan. “Operating cash burn that was a bit worse, but overall cash burn was a touch better … Overall, expect neutral reaction.”
Mulally said Ford has reduced its operating costs in North America by more than $5 billion, putting it ahead of the goals set in its turnaround plan. But he acknowledged that these improvements continue to be undermined by the harsh realities of the marketplace.
The global economic crisis took a heavy toll on all of Ford’s international divisions.
The company still managed a $105 million profit for the quarter in South America, compared with $418 million a year ago, but Ford of Europe swung to a loss of $330 million from a profit of $223 million in the last three months of 2007. Its operations in the Asia-Pacific and African regions lost $208 million, compared with a profit of $10 million a year ago.
Its Swedish brand, Volvo, reported a loss of $736 million. It broke even in the fourth quarter of 2007. Ford is continuing its “strategic review” of Volvo with an eye to selling it in the near future to raise additional cash.
Ford Credit reported a pre-tax loss of $372 million in the fourth quarter, up from $263 million a year ago. Ford blamed the increase on higher provisions for credit losses and lower volumes. Repossessions were also up.
Ford’s lending arm posted a net loss of $1.5 billion for 2008, a decrease of $2.3 billion from net income of $775 million a year earlier.
Outlook remains ‘challenging’
Ford said 2009 would be a “challenging” year for it and the entire automotive industry.
Booth said the company now expects U.S. vehicle sales to be as low as 11.5 million units this year, cutting the company’s forecast by up to a million units from just a few weeks ago. But Ford also predicted that its share of the U.S. market will end its decades-long decline this year after posting three consecutive months of market share increases for the first time in 12 years.
Mulally said early indications are that January will also see a modest share gain. He also said Ford’s cash burn rate will be “significantly less” in 2009.
That is due to cost-cutting efforts, deferred payments to the UAW retiree health care trust. The company is also banking on significant loans from the U.S. Department of Energy and European Investment Bank to help fund the development of new, more fuel-efficient cars and trucks.
Ford is not cutting back on its aggressive product plans.
“Our pipeline is full,” Mulally said. “Ford has sufficient liquidity to make it through this global downturn and to maintain our current product plans without the need for government bridge loans.”
But he said Ford still has the opportunity to seek federal aid if necessary. Mulally said that might be necessary if a “major competitor” filed for bankruptcy, an obvious reference to rival General Motors Corp.
“Despite the present turbulence in the worldwide economy, I continue to believe that Ford is well-positioned to take advantage of our scale and global product strengths,” he said. “We can effectively operate through the current downturn.”
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That was worse than Wall Street was expecting, but the company insisted that it has sufficient liquidity to weather the current economic crisis and does not need government aid.
“We faced nearly unprecedented challenges in our global markets,” CEO Alan Mulally told reporters and analysts during a conference call this morning. “The severe economic challenges had a significant impact on our fourth-quarter results.”
Ford’s full-year after-tax loss from continuing operations was just over $7.1 billion, translating into a loss of $3.13 per share. Its fourth quarter after-tax loss from continuing operations, excluding special items, was $3.3 billion, or $1.37 per share, compared with a loss of $487 million, or 23 cents per share, a year ago. Analysts had been expecting a loss of $1.30 per share, according to a survey by Thomson Reuters.
More troubling was the fact that Ford burned through $5.5 billion in cash during the last three months of 2008. That was better than the $7.7 billion the company burned through in the third quarter, but more than analysts were hoping for.
Still, Ford’s automotive operations finished the year with $24 billion in available liquidity, including $13.4 billion in gross cash.
Ford to draw down revolver
The Dearborn automaker also said it would draw down its $10.1 billion credit revolver, but Chief Financial Officer Lewis Booth told reporters that it did not intend to use that money to fund operations, nor was it required to maintain minimum cash levels. Rather, he said Ford decided to put that money on its own books now because of the “uncertainty” in the financial markets.
Ford lost about $800 million in available credit when Lehman Bros. collapsed last year.
Ford stressed that it expects to significantly reduce its cash burn rate this year, despite a dismal economic outlook. It will save billions compared to last year by deferring payments to a union-run trust for retiree healthcare and operating cost reductions announced last fall.
It also will cut 1,200 jobs at Ford Credit to further reduce operating costs in its consumer lending arm and announced that it had reached an agreement with the United Auto Workers to end to the controversial jobs bank program, which continues to pay idled factory workers.
Ford is alone among U.S. automakers in not asking the federal government for financial aid, though it warned that it too could ask Washington for loans if car and truck sales continue to deteriorate.
Ford’s sales plunged 20.5 percent last year, surpassing the industry slide of 18 percent. They were down nearly 32.3 percent in December, better than the industry drop in December of 35.6 percent, according to Autodata Corp. Ford expects results to be down sharply into this year.
Because Ford has not asked the federal government for money, it is not bound by the same restrictions imposed on rivals General Motors Corp. and Chrysler LLC by the White House in December, both of which are mandated to seek significant concessions from bondholders, suppliers and the UAW.
Ford hopes to negotiate some of the same deals.
Ford is in the midst of its latest round of white-collar layoffs, which aims to cut Ford’s U.S. salaried payroll by another 10 percent.
The automaker has eliminated more than 13,000 salaried positions and more than 43,500 hourly jobs in North America since the end of 2005.
“In response to these challenges, we took decisive actions,” Mulally said.
North America did better than expected
There was some reason for hope in Ford’s financial results, analysts said.
Its fourth quarter pre-tax loss for North American automotive operations was $1.9 billion, just $400 million more than the company reported for the same period in 2007.
Analysts had been expecting a much sharper decline, given Ford’s dramatic drop in U.S. sales. Fourth quarter revenue was $11.3 billion, down from $17.3 billion a year ago. That means Ford realized significant gains from its North American cost-cutting efforts during the quarter.
“Profits were largely in line — better North America on costs, weaker internationally,” said analyst Himanshu Patel of JPMorgan. “Operating cash burn that was a bit worse, but overall cash burn was a touch better … Overall, expect neutral reaction.”
Mulally said Ford has reduced its operating costs in North America by more than $5 billion, putting it ahead of the goals set in its turnaround plan. But he acknowledged that these improvements continue to be undermined by the harsh realities of the marketplace.
The global economic crisis took a heavy toll on all of Ford’s international divisions.
The company still managed a $105 million profit for the quarter in South America, compared with $418 million a year ago, but Ford of Europe swung to a loss of $330 million from a profit of $223 million in the last three months of 2007. Its operations in the Asia-Pacific and African regions lost $208 million, compared with a profit of $10 million a year ago.
Its Swedish brand, Volvo, reported a loss of $736 million. It broke even in the fourth quarter of 2007. Ford is continuing its “strategic review” of Volvo with an eye to selling it in the near future to raise additional cash.
Ford Credit reported a pre-tax loss of $372 million in the fourth quarter, up from $263 million a year ago. Ford blamed the increase on higher provisions for credit losses and lower volumes. Repossessions were also up.
Ford’s lending arm posted a net loss of $1.5 billion for 2008, a decrease of $2.3 billion from net income of $775 million a year earlier.
Outlook remains ‘challenging’
Ford said 2009 would be a “challenging” year for it and the entire automotive industry.
Booth said the company now expects U.S. vehicle sales to be as low as 11.5 million units this year, cutting the company’s forecast by up to a million units from just a few weeks ago. But Ford also predicted that its share of the U.S. market will end its decades-long decline this year after posting three consecutive months of market share increases for the first time in 12 years.
Mulally said early indications are that January will also see a modest share gain. He also said Ford’s cash burn rate will be “significantly less” in 2009.
That is due to cost-cutting efforts, deferred payments to the UAW retiree health care trust. The company is also banking on significant loans from the U.S. Department of Energy and European Investment Bank to help fund the development of new, more fuel-efficient cars and trucks.
Ford is not cutting back on its aggressive product plans.
“Our pipeline is full,” Mulally said. “Ford has sufficient liquidity to make it through this global downturn and to maintain our current product plans without the need for government bridge loans.”
But he said Ford still has the opportunity to seek federal aid if necessary. Mulally said that might be necessary if a “major competitor” filed for bankruptcy, an obvious reference to rival General Motors Corp.
“Despite the present turbulence in the worldwide economy, I continue to believe that Ford is well-positioned to take advantage of our scale and global product strengths,” he said. “We can effectively operate through the current downturn.”
Check out www.CMOC.ca for more Ford related chat
More...
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