Ford bonus jumps to $600
No. 2 automaker reports profits in 2004, but faces competitive pressures this year.
By Eric Mayne / The Detroit News
DEARBORN -- Ford Motor Co.'s 76,000 U.S. hourly workers will receive higher profit-sharing checks of $600 for 2004 -- more than triple the previous year's payout -- but the company's core automotive business is showing signs of a slowdown.
In addition to Ford workers, about 18,000 employees at Ford's former parts division, Visteon Corp., are eligible for the bonus, which will be paid March 9.
"I'm grateful for it -- it's better than nothing," said John Garner, who hired on with Ford six years ago and now works at Visteon's instrument panel plant in Saline. "I can take my family out for dinner and a movie."
The $600 payout is the highest since Ford distributed profit-sharing checks that averaged $6,700 in 2000.
Ford said Thursday it also will pay modest performance bonuses to eligible salaried employees, and give merit pay increases to eligible salaried employees in the United States and Canada.
General Motors Corp. said this week it will pay U.S. hourly workers average $195 in profit sharing. DaimlerChrysler AG's Chrysler Group, which rebounded in 2004 with strong profits and sales, is expected to pay the largest average bonuses of the Big Three. Chrysler will announce earnings Feb. 10.
For Ford, 2004 was a mixed year.
Despite its struggles to make money selling cars and trucks and increased competition from Japanese automakers, the automaker made progress toward its goal of earning $7 billion pre-tax by mid-decade.
The automaker's net profits jumped sevenfold to $3.5 billion in 2004 on record financial earnings and improved automotive results. Revenues rose $7.2 billion to $170.8 billion. It earned $1.5 billion in North America last year, a drop of $327 million from 2003, but good enough to lift profit-sharing payouts from $195 last year.
"In 2004, our company gained momentum, delivering more revenue and earnings, more new products and more innovative breakthroughs," said chairman and CEO Bill Ford Jr.
In the fourth quarter, the automaker's finance arm helped it earn $104 million in profits, up from a loss of $793 million a year ago. But Ford's automotive business reported a pre-tax loss of $470 million, a sharp decline from a pre-tax profit of $13 million a year earlier.
Lower output, shrinking U.S. market share, high health care and material costs, and sky-high marketing expenses are undermining automotive operations. And this year is not expected to get easier.
Ford's global auto operations earned $850 million last year, up from $153 million in 2003, but well short of the company's $1 billion target.
"We need the automotive business to contribute more than it has," said Don Leclair, Ford's chief financial officer, in a conference call.
Investors responded unfavorably to the report and drove Ford shares down 47 cents, or 3.4 percent, to $13.46 Thursday.
Analysts say Ford is still grinding its gears, slowed by increased competition, crippling health care costs and unfavorable currency exchange rates that are producing wider losses at Premier Automotive Group, its collection of European luxury brands.
And like its cross-town rival, GM, Ford was carried by its financing arm, not vehicle sales.
"The operating performance of the automotive business was not very good," said analyst John Casesa of Merrill Lynch. "Ford's turnaround is continuing, albeit at a slower rate, given the tough spot it is in between GM's price-cutting and the growth of Japanese automakers."
Employee and retiree health care obligations cost Ford $1,000 per vehicle last year, and competition and an aging car lineup reduced the automaker's share of the lucrative U.S. market to 18 percent from 19.2 percent.
Ford is counting on new models -- the Ford Five Hundred and Mercury Montego sedans, a new Ford Mustang coupe and Ford Freestyle -- to jump-start U.S. sales this year.
The automaker's fourth-quarter results were undermined by two issues: Visteon, its former parts division; and Premier Automotive Group.
Ford took a $600 million fourth-quarter charge to offset the value of a note owed by Visteon. The charge relates to post-retirement health care benefits and life insurance provided to Ford workers who have remained with Visteon since the supplier was spun off in 2000.
Visteon reimburses the automaker for the costs. But Ford took the charge after determining that Visteon is unlikely to meet its obligations in the near future, Leclair said.
Visteon and Ford are in talks about a major restructuring to lower the automotive supplier's operating costs.
Ford's other fourth-quarter pothole was the performance of PAG, which is made up of Jaguar, Land Rover, Volvo and Aston Martin. It was expected to break even for the year, but reported a full-year pre-tax loss of $740 million -- down from a pre-tax profit of $171 million in 2003.
Ford blamed an exchange rate that favors the euro over the U.S. dollar, along with lower output at Jaguar, for the wider losses at PAG.
"The investment community is concerned about Premier," said Dan Poole, vice president of equity research at National City Corp., which manages $23 billion, including Ford shares. "Those results were below our expectations."
Leclair said Jaguar cut production to ensure quality. "Clearly, we're not satisfied," he said. "We're going to get that fixed the way we fixed South America and Europe."
Ford's South American operations recorded a pre-tax profit of $140 million -- a $249 million reversal from 2003's full-year loss of $129 million. On the strength of products that share platforms, such as the EcoSport small utility truck and Fiesta small car, Ford also increased its share of Brazil's market 2003.
Ford's European operations also improved last year with a $1.2 billion swing from 2003's $1.1 billion loss to a $114 pre-tax profit.
Bolstered by the rollout of the Focus C-Max, the automaker upped its full-year share of the European market to 8.7 percent from 8.6 percent in 2003.
Ford's top executives are scheduled to disclose 2005 financial targets at a meeting Tuesday in New York. Leclair offered several "continuing challenges" for the coming year, including commodity price increases, rising health care costs and the intensely competitive global automotive business.