Re: U.S.A.:Ford narrows its third-quarter loss to $25 million
Ford's profit picture brighter
Automaker on track to earn $1.8 billion in '03
October 17, 2003
BY JAMIE BUTTERS
FREE PRESS BUSINESS WRITER
Ford Motor Co. sparked a rally in automotive stocks Thursday when it released profit figures that surpassed Wall Street's expectations and said it would end 2003 in better financial shape than it originally projected.
The Dearborn automaker still lost $25 million during the third quarter, but that was a lot better than the $200 million it was expected to lose.
Overall, Ford expects to earn $1.8 billion for the year.
The reasons: record profits at its lending arm, Ford Credit, and big-time cost-cutting in Europe and North America.
Unlike General Motors Corp., which has a giant mortgage company in GMAC, Ford Credit deals only in automotive-related business, such as insurance and financing.
In the July-to-September quarter, Ford Credit earned a record $809 million before taxes -- $504 million after taxes.
This helped to offset pretax losses of $609 million from Ford's continuing automotive operations.
To cope with no-interest loans and other price-cutting promotions, Ford has spent just about the whole year cutting costs.
Heading into the year, Ford said it aimed to cut $500 million from its ongoing expenses. It has now cut $2.7 billion, and aims to exceed $3 billion in trims by the end of 2003, executives said.
Thanks to all of that cutting -- including 6,700 jobs in Europe and more than 3,000 in North America -- Ford has maintained a razor-thin automotive profit of $53 million through three quarters, $109 million if you don't count a onetime charge from layoffs in the United Kingdom.
"Since the revitalization plan was put together, it was a much, much tougher environment than we planned on. . . . Unfortunately, tough conditions sometimes require tough choices, like the restructuring actions we recently announced," said Don Leclair, Ford's chief financial officer.
Analysts are watching closely to see whether Ford can turn a profit from the manufacturing and wholesaling of cars and trucks. It is a key indicator of whether Ford can meet its goal of earning $7 billion before taxes by 2005 or 2006. Just as important, leading credit-rating agency Standard & Poor's Corp. has warned that it may cut Ford's rating -- currently only two notches above junk status -- if it loses money on cars and trucks this year.
Leclair said the appropriate number to use is the one that excludes onetime charges.
S&P is "still in the process of assessing" whether to exclude the onetime items, said Gregg Stein, a spokesman for the agency.
Either way, Ford has a chance to meet the break-even goal, having made it through the launch of the redesigned F-150 pickup and the traditionally weak third quarter, when plants shut down for summer break.
"We continue to believe that Ford is in a tough spot between GM and the Japanese, but management is doing an impressive job of limiting the damage," industry watcher John Casesa of Merrill Lynch wrote in an e-mail.
But the big moneymaker for Ford continues to be Ford Credit, whose net profits rose to a record $504 million from $294 million in the third quarter of 2002, thanks to a lower provision for credit losses and lower borrowing rates.
Ford Credit paid an average of 4.1 percent when it borrowed money in the third quarter, down from 5.1 percent in same months of last year, saving $307 million before taxes.
"It is helping us at the moment. There's no denying that," said David Cosper, Ford Credit's chief financial officer.
Ford has been more conservative this year about taking one-time charges -- expenses that it wants investors to believe won't be repeated -- but it took more than $300 million in charges this quarter and at least $500 million more are on the way.
Between $550 million and $600 million in charges are expected in the fourth quarter and the first half of 2004, as Ford cuts the third shift at its Genk, Belgium, plant and eliminates 6,200 jobs elsewhere in Europe.
Setting aside that charge and the onetime items in the third quarter, Ford expects to earn about $1.8 billion for the year.
Earlier, it had said it would earn about $1.25 billion for the year, without onetime charges.
However, Ford's new projected profits -- before onetime charges -- are 10 percent less than what Nissan Motor Co. says it earned in half a year.
Late Wednesday, the Japanese automaker announced that in the first half of fiscal 2003, it generated a net profit of $2 billion. That's down a little from the previous year, when Nissan sold a plant and enjoyed lower tax rates.
On the backs of those two releases, almost all auto industry stocks were up.
Nissan's U.S. shares rose 29 cents, or 1.2 percent, to $23.89. Shares of other automakers,including GM to Fiat were all up, as were most suppliers.
Ford shares rose 20 cents, or 1.7 percent, to finish Thursday at $12.34. That left the shares only 19 cents below Ford's 52-week high.
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.....