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Stacy94PGT · 05-21-2003, 08:10

Wednesday, May 21, 2003

Despite the high cost of sales incentives, automaker expects to meet profit goals

By Mark Truby / The Detroit News

DEARBORN -- Ford Motor Co. Chairman and CEO Bill Ford Jr. vowed the automaker would reach its profit goals this year despite the ballooning costs of rebates, low-interest loans and other sales incentives.

"We can and will deliver," Bill Ford told analysts Tuesday in a meeting at Ford's headquarters in Dearborn. "We really are on track."

Ford expects to make 70 cents a share -- about $1.2 billion -- this year after losing a combined $6.4 billion in 2001 and 2002.

Earlier this year, Ford said it expected net pricing in North America to remain flat for 2003, meaning that it planned to squeeze enough additional revenue out of car and truck sales to offset rising incentives.

Many analysts said Ford's goal was unrealistic given the fierce competition among automakers for new-car buyers. Ford conceded Tuesday that it might not meet its pricing goals but would recoup any shortfall through intensive cost cutting.

"Competitive and economic conditions may put our pricing assumptions at risk in both Europe and the U.S., but these would be adjustments not major detours," Ford President Nick Scheele said. "If our pricing assumptions do not hold we are quite certain that our accelerated cost actions will make up any shortfall."

Falling industry sales, rising stockpiles, and a glut of production capacity is creating a deflationary environment for automakers.

Shares of Ford fell 20 cents, or 2 percent, to $9.62 in trading on the New York Stock Exchange.

Ford now says it will easily surpass a goal of cutting costs by $500 million in 2003. The automaker is expected to announce revised cost-cutting goals for the year after it releases second-quarter earnings in July.

The company has teams of employees searching for ways to reduce product spending, slash overhead and reduce purchasing costs.

In contrast to GM, which has hiked rebates across its vehicle lineup, Ford has employed a more selective discount strategy. While Ford hasn't exactly tamed the incentive monster, the spending strategy has saved the company millions of dollars.

"Our product strength does not require us to match incentives on every single vehicle," said Ford Chief Financial Officer Allan Gilmour.

In addition to reaffirming the automaker's profit target, Bill Ford made a point to reassure investors that his management team is working together as a team. The company has been dogged by rumors that some senior executives don't get along.

"I feel very good about the focus of our management team," Bill Ford said. "Is there tension in our meetings? You bet there is and there should be. The worst kind of meeting you can have is when everybody sits around a table and nods their heads."

Ford spent the last two days showing Wall Street analysts its future lineup, including the important new F-150 pickup that debuts later this year. Among the new offerings: the new F-150, the new Ford Five-Hundred sedan and the Freestyle, a car-based utility vehicle.

"The main idea that I took away from the meeting is just how important the F-150 is to Ford's future," said Saul Rubin of UBS Warburg.

Deutsche Bank's Rod Lache said he "spent a lot of time looking at and riding in the (F-150), and liked it. It will likely do some damage to Chrysler and GM market share in the segment."

RPO83 · 05-22-2003, 03:19

Ford chief says 2003 profit goals will be reached

Source: just-auto.com editorial team

Ford chairman and CEO Bill Ford has vowed the company would reach its profit goals this year despite the ballooning costs of rebates, low-interest loans and other sales incentives, the Detroit News said.

"We can and will deliver," the paper quoted Bill Ford as telling analysts at a Tuesday meeting at Ford's headquarters in Dearborn, Michigan. "We really are on track."

The Detroit News said Ford expects to make 70 cents a share -- about $US1.2 billion -- this year after losing a combined $6.4 billion in 2001 and 2002.

The paper noted that, earlier this year, Ford said it expected net pricing in North America to remain flat for 2003, meaning that it planned to squeeze enough additional revenue out of car and truck sales to offset rising incentives.

Many analysts told the Detroit News that Ford's goal was unrealistic given the fierce competition among makers for new-car buyers and Ford conceded on Tuesday that it might not meet its pricing goals but would recoup any shortfall through intensive cost cutting.

"Competitive and economic conditions may put our pricing assumptions at risk in both Europe and the US, but these would be adjustments not major detours," Ford president Nick Scheele said, according to the Detroit News. "If our pricing assumptions do not hold we are quite certain that our accelerated cost actions will make up any shortfall."

The paper said that, in addition to reaffirming Ford's profit target, Bill Ford made a point of reassuring investors that his management team is working together as a team � the company has been dogged by rumours that some senior executives don't get along.

"I feel very good about the focus of our management team," Bill Ford reportedly said, according to the Detroit News. "Is there tension in our meetings? You bet there is and there should be. The worst kind of meeting you can have is when everybody sits around a table and nods their heads."

The paper said Ford spent two days showing Wall Street analysts its future lineup, including the important new F-150 pickup � Ford�s top-selling vehicle � that debuts later this year.