US:Analysts cut Ford earnings estimates - Ford Forums

Stacy94PGT · 12-01-2006, 02:29

Analysts cut Ford earnings estimates

Buyouts, cash plan alter their view

BY SARAH A. WEBSTER

DETROIT FREE PRESS BUSINESS WRITER

Several automotive analysts cut their earnings estimates for Ford Motor Co. on Thursday after digesting the news that 38,000 hourly workers have signed up for buyouts and that the automaker expects to burn through $17 billion in cash through 2009.

For 2007, Morgan Stanley now sees Ford losing $1.75 a share. That's 52% more than the brokerage firm's prior estimated loss of $1.15 a share.

"We think it will be a supreme test of shareholder patience as Ford posts quarter after quarter of staggering losses and cash burn rates in 2007," Robert Barry, an auto analyst with Goldman Sachs, wrote in a note to investors Thursday. "We think the actions Ford has outlined to fix the North American auto business will help to improve earnings, but we are not yet convinced these initiatives will be sufficient to get Ford North America back in the black.

"The fact that Ford's own public estimates suggest only minimal profitability out in 2009 ... does little to boost our confidence."

Goldman Sachs lowered its estimate on Ford's earnings next year to a loss of $1.35 a share, a change of 80% from a prior estimated loss of 75 cents a share.

The estimates, which exclude one-time charges, suggested Ford will lose $2.5 billion to $3.2 billion next year before restructuring charges, which are expected to be substantial.

"During the period 2007 through 2009, we expect cumulative automotive operating-related cash outflows of about $10 billion and cumulative cash expenditures for restructuring actions of about $7 billion. More than half of this $17-billion cash outflow is expected to occur in 2007," Ford's filing with the U.S. Securities and Exchange Commission said Wednesday.

For 2008, Morgan Stanley is now estimating Ford's losses at 60 cents a share, compared with an expected loss of 10 cents a share previously. Goldman Sachs predicts Ford will lose 75 cents instead of the previously predicted 50 cents.

Both of those estimates would put Ford's losses at just over $1 billion before one-time expenses.

The revised estimates are a sure sign that Wall Street heard Ford's warning in regulatory filings Wednesday that the automaker's performance will get worse before it gets better as it executes its Way Forward restructuring plan.

The Dearborn-based automaker has lost $7 billion this year, and its turnaround plan calls for cutting 44,000 jobs, closing 16 plants and taking other actions in order to be profitable by the end of the decade.

On Monday, Ford announced it had secured an $18-billion financing package, using as collateral nearly all of its assets, including the Blue Oval insignia.

Now that Ford projects burning through nearly the entire package of loans, credit and other funding over the next three years, the automaker looks to end 2009 with the same $20 billion or so that it previously expected to have on hand at the end of this year.

"Ford is doing things to buy itself time to fix its problems," Jonathan Steinmetz, an auto analyst with Morgan Stanley, wrote in a Thursday note to investors. "It is beginning to attack cost issues, but the hole it is in is extremely deep and competitors are not standing still. ... While the employee buyout is an important step ... Ford will need to do a lot more."

In other Ford news, the automaker said Thursday that another officer is leaving the company as part of an effort to reduce the number of high-ranking executives.

Hans-Olov Olsson, chairman of the board at Volvo Cars, will retire effective Jan. 1.

He will be succeeded by Lewis Booth, 58, who will continue in his roles as executive vice president in charge of Ford of Europe and Ford's foreign luxury brands, such as Jaguar, Land Rover and Aston Martin.