July 24, 2008
Ford to Reveal Its Revised Recovery Roadmap Today
By Sarah A. Webster, Detroit Free Press
Jul. 24--Ford Motor Co.'s effort to bounce back from $15.3 billion in losses over the past two years has been foiled at every turn by a flurry of negative economic conditions -- from the collapsing housing and credit markets to $4-a-gallon gasoline -- which have left consumers spooked.
Today, Ford will reveal just how far off track its road to recovery has run -- along with a revamped plan to get back on course.
The market is expecting Ford to report a second-quarter loss of 27 cents per share or $600 million -- before onetime items -- according to a consensus of estimates from Thomson One Analytics.
While some of that is because ofFord's slumping sales, which are down 14% in this environment, the rise in fuel prices also has led to a spike in prices for the materials that Ford needs to build cars and trucks. Ford is feeling the squeeze on its revenues and its expenses.
Ford is expected to log some big write-downs today as a result of these growing expenses.
While that will take Ford back into the red, following a $100-million profit in the first quarter, such a performance would not be insurmountable for Ford, which has dealt with worse.
In the last three months of 2006, Ford posted a $5.8-billion loss, or $3.05 a share, which was the second-worst quarterly result in its history. Ford also lost $6.7 billion in the first quarter of 1992, mainly because of accounting rule changes on health care liabilities.
The new revival plan Ford is set to release today is to be highly focused on delivering affordable, fuel-efficient cars faster.
Experts told the Free Press that the most important thing Ford can do is move faster and cut deeper.
"They've got to cut costs again," said George Magliano, director of automotive industry research in North America for Global Insight, a research firm in New York. "In prior restructuring plans, they were vague about how they were going to get there and when. You're going to see something different. The pressure is on."
Ford, which has staked much of its reputation in recent years on "Built Ford Tough" trucks, says it believes small cars will eventually represent 60% of all vehicles sold worldwide, with just 25% being medium cars and 15% being large cars and trucks.
Based on this forecast, Ford is expected to announce that it is converting several of its truck factories to car plants, and analysts are also hopeful that Ford will close factories it no longer needs, as sales continue slipping.
After years of languishing, Ford's Mercury brand also is to be given a breath of new life with the new car-based strategy.
After posting a first-quarter profit of $100 million in April, and proclaiming the company's turnaround plan on track, Ford CEO Alan Mulally revealed a month later that more job cuts and restructuring would be necessary.
Ford has been working to reduce 15% of salary-related costs by Aug. 1, and Ford will likely provide an update today on where cost-cutting measures stand with its salaried and hourly workforces.
While salaried workers are being dismissed involuntarily, blue-collar workers have had the opportunity to take buyouts at select plants.
Through June, Ford's sales in the United States, the company's most important market, were off 14%, while the overall market was down 10%.
Ford's president of the Americas, Mark Fields, also said this week that he did not know when the market might bottom out or begin to recover.
One of the biggest assets Ford has as it moves through this difficult period is cash. Through March, Ford had $40.6 billion in cash and available credit.
Contact SARAH A. WEBSTER at 313-222-5394 or [email protected]
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