April 21, 2006
Ford posts loss on restructuring
By Poornima Gupta
DETROIT (Reuters) - Ford Motor Co. on Friday reported its
biggest quarterly loss in over four years as it took $2.5
billion in pre-tax charges for jobs cuts and plant closings at
the start of a massive restructuring effort.
Revenue from auto sales fell 6 percent, reflecting
incentives and discounts to lure customers to show rooms and
lower-margin sales to commercial fleets and car rental
companies. Shares fell 3 percent in premarket trading.
Ford, which is closing 14 plants and cutting up to 30,000
factory jobs in North America, posted a first-quarter net loss
of $1.19 billion, or 64 cents per share, compared with a profit
of $1.21 billion, or 60 cents per share, a year ago.
The loss was Ford's largest since the fourth quarter of
2001, when it posted a $5 billion loss on charges for an
earlier restructuring when Chief Executive Bill Ford Jr. began
his tenure at the helm of the company his great grandfather
Shares of Ford slipped to $7.85 in trading before the
opening bell on the New York Stock Exchange, down from a
Thursday close of $7.95.
Earnings from continuing operations were 24 cents per
share, short of average Wall Street analysts' expectations of
26 cents a share as tracked by Reuters Estimates.
One-time charges reduced earnings by 88 cents per share in
the first quarter, or $1.65 billion on an after-tax basis.
Revenue fell 9 percent to $41.1 billion from $45.1 billion.
The quarterly results were Ford's first since the automaker
announced its restructuring plan, dubbed the "Way Forward." The
cost-cutting plan, designed to restore profitability in Ford's
core North American automotive operations by 2008.
"This transformation isn't going to be quick and it isn't
going to be painless. It will involve risks -- and the
financial rewards will not be immediate," Bill Ford said in a
statement. "But in the end, I believe we'll get there."
Ford and cross-town rival General Motors Corp., which
reported a $323 million quarterly loss on Thursday, have seen
their margins squeezed by intense competition from Asian rivals
and shifting consumer tastes away from profitable sport utility
Both companies are also struggling with high fixed costs
for wages and benefits and a cut in their credit ratings to
Ford expects to take a total of $3.4 billion in pretax
charges for the full year for its restructuring.
LOSS FOLLOWS U.S. SALES DECLINE
The charges reflect $1.13 billion for layoffs and a
provision of Ford's contract with the United Auto Workers that
guarantees continued payments of wages and benefits to
dismissed union workers under the so-called jobs bank program.
Ford also took a charge of $269 million related to pension
costs associated with its planned plant closures and another
$183 million for other facility-related costs.
Ford's U.S. vehicle sales fell almost 3 percent in the
first quarter of 2006. Although the company's global vehicle
sales rose slightly to 1.72 million units, revenue from those
sales fell almost 6 percent to $37 billion.
Ford's core automotive operations posted an operating loss
of $184 million excluding restructuring charges, while its
finance arm, Ford Motor Credit, contributed a profit of $479
Ford deepening troubles has sent Ford share down about 15
percent over the last 12 months. The company now has a $14.2
billion market value, less than a tenth of the capitalization
of Japanese rival Toyota Motor Corp.
Shares fell 23 cents, or 3 percent, to $7.72 in premarket