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Ford 4th-quarter earnings beat projections

Restructuring plan spurs rally as stock gains 5.3 percent, or 42 cents, to close at $8.32 a share.

Christine Tierney / The Detroit News

Ford Motor Co. reported an unexpected rise in fourth-quarter earnings Monday, triggering a rally in its stock, after cutting losses in the crucial North American market.

The automaker's 2005 profits dropped 43 percent to $2 billion, reflecting a $1.6 billion full-year loss in its North American automotive operations.

Ford shares gained 42 cents to close 5.3 percent higher at $8.32 a share in New York Stock Exchange trading after climbing as high as $8.59 a share on the financial results and news of the company's long-awaited restructuring plan.

Rival General Motors Corp. announced a similar plan in October to downsize its operations in the fiercely competitive North American market, where both U.S. auto giants are losing ground to fast-growing and nimbler Asian rivals.

But Ford surprised financial analysts with a 19 percent rise in fourth-quarter net income of $124 million, after trimming its pre-tax losses in North America to $143 million from $470 million in the year-earlier quarter.

"In comparison with a year ago, the biggest improvement reflected cost reductions and favorable net pricing," Ford chief financial officer Don Leclair said.

For the year as a whole, however, Ford struggled with a 10th straight decline in U.S. market share, lower revenue in the region, slumping demand for large sport-utility vehicles and an "unfavorable cost performance" in the first three quarters of the year.

But in the fourth quarter, Ford reduced costs by $400 million from year-earlier levels, Leclair said.

Ford took a $962 million charge in the fourth quarter related to reductions in its automotive work force, which it trimmed by more than 10,000 last year. The restructuring plan calls for 25,000 to 30,000 additional job cuts by 2012.

"Surprisingly, the main driver of the upside in the quarter was Ford's automotive operations, which posted a pretax loss of $12 million, much better than our forecast for a loss of $910 million," Merrill Lynch analyst John Murphy said. "Within automotive, North America accounted for the majority of the upside," he wrote in a research note.

Most analysts were expecting Ford to lose close to $1 billion in North America in the fourth quarter, in line with the losses run up in the second and third quarters.

"Better cost performance was a key driver of the improvement in North America, and possibly higher profitability on cars than we had estimated," said Robert Barry at Goldman Sachs.

Excluding special items -- such as the proceeds from the sale of its Hertz Corp. car rental company and charges for staff reductions and asset writedowns -- Ford's after-tax income from continuing operations slipped to $511 million in the fourth quarter from $554 million a year earlier.

Ford's European operations returned to profit in 2005 as the automaker stemmed the losses of its Premier Automotive Group collection of luxury brands.

Ford of Europe and the premier group -- which includes the Jaguar, Land Rover, Volvo and Aston Martin nameplates -- reported a $112 million profit for the fourth quarter, compared with a $324 million loss a year earlier, as improved results at Land Rover helped to offset losses at Jaguar.

Nigel Griffiths, an auto analyst at Global Insight in London, said Land Rover benefited from strong demand for the new Range Rover Sport SUV priced in the $60,000 to $70,000 range.
 
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