Japan:Ford vows to break even in 2004
Company will cut expenses if necessary to ensure auto operations finish in black
By Christine Tierney and Bill Vlasic / The Detroit News
TOKYO -- Ford Motor Co. is committed to breaking even on its automotive operations this year and will step up cost-cutting efforts if necessary to meet the target, Ford President Nick Scheele said Wednesday.
"We will deliver our numbers," Scheele told reporters at the Tokyo Motor Show. "If we need to, we'll take more cost out."
Ford was stung this week by Standard & Poor's decision to put the automaker's credit ratings on "credit watch with negative implications," a move that could affect Ford's cost of borrowing money.
Investors greeted the move with some alarm, driving Ford shares down 2.63 percent, or 32 cents, to $11.85 in New York Stock Exchange trading Wednesday.
Scheele said he was "surprised" by S&P's announcement, particularly after Ford beat Wall Street's estimates for third-quarter results and raised its 2003 earnings outlook to between 95 cents and $1.05 a share from 70 cents.
Ford is in the midst of cutting $3 billion in costs this year in its effort to rebound from a combined $6.4-billion loss in 2001 and 2002.
But the company's auto operations lost $609 million in the third quarter. So far this year, Ford's global auto business has earned only $53 million on sales of $98.7 billion, and tough market conditions are expected to persist in the fourth quarter.
In its report, S&P said it expects Ford's pre-tax auto earnings to "approximate management's break-even objective."
However, the rating agency cast doubt on whether Ford can make money in North America in an environment of sky-high incentives and an industry-wide deluge of new products.
"Even if industry demand and pricing undergo a cyclical recovery, Standard & Poor's is skeptical about whether the additional earnings improvement in North America that was assumed can be realized," S&P said.
S&P singled out Ford's European operations, which lost $452 million in the third quarter, as cause for concern.
Ford is cutting 5,000 jobs in Germany, Belgium and the United Kingdom as part of a major restructuring effort in Europe.
Scheele pointed out that Ford's cash position of $26.9 billion remains among the strongest in the industry as it launches its latest new-product offensive.
"We increased our net cash," he said. "In fact, the actual (S&P) report says that we are awash in cash at both the parent company and the (Ford) credit company."
Scheele conceded that the all-out incentive war in the U.S. market shows no sign of cooling off. "We don't see a reduction in the revenue wars," he said.
Beyond Ford's $3-billion cost-cutting target for the year, Scheele said the company expects to trim costs further by buying auto parts from suppliers in low-wage markets.
He said Ford was on track to buy about $1 billion in components from manufacturers in China. That figure, he said, would not be completely achieved this year.
Besides putting Ford on credit watch, S&P downgraded the credit rating of German automaker DaimlerChrysler AG. The moves caused both companies bonds to lose value in the market Wednesday.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....