The Telegraph
Since 1st March, 1999
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Ford trundles along loss path

Detroit, Jan. 22: The Ford Motor Co reported a narrower-than-expected loss for the fourth quarter on Tuesday but continues to lose money and market share while its chief rival, General Motors, has posted profits and gained market share two years in a row.

A year into Ford’s corporate turnaround plan, overall costs continued to rise in 2002 because of, among other things, lavish changes in redesigned or new sport utility vehicles like the Lincoln Navigator, Aviator and Ford Expedition. The company said its goal was to trim $ 500 million from its costs this year.

Fierce competition is also expected this year in the vital US market as foreign competitors continue to flood the market at the same time that overall industry sales are expected to fall. Ford’s most important introduction of the year, a new version of its flagship F-150 pickup truck, will face new competition from Nissan, which is joining Ford, GM, Chrysler and Toyota in the full-size truck market.

“The harder the company works on cost, the tougher the market conditions get,” said John Casesa, an analyst at Merrill Lynch. “It’s tough to make net progress.”

Ford’s chairman and chief executive, William Clay Ford Jr, is determined to spend aggressively to ensure that the company’s vehicles are competitive. But Wall Street is concerned that the company’s capital spending, which will reach $ 8 billion this year, is not generating enough profits. “This company is spending a lot of money, and it’s not clear they’re getting a bang for their buck,” said Stephen Girsky, an analyst at Morgan Stanley, adding that Ford’s capital spending per vehicle was 30 per cent higher than that of GM.

“This revitalisation plan hasn’t really reached the acceleration point yet,” he said. “It’s just getting started.”

There were some signs of progress. In the fourth quarter, Ford posted a net loss of $ 130 million, or 7 cents a share, compared with a loss of $ 5.1 billion, or $ 2.81 a share, in the period a year earlier, which resulted from charges related to the turnaround plan. Revenue for the quarter was $ 41.6 billion, up $ 869 million.

Excluding charges related in part to a restructuring of European operations, Ford had operating income of $ 150 million, or 8 cents a share. On that basis, the results beat analysts’ expectations by a penny, according to Thomson First Call.

For the year, Ford’s net loss was narrowed to $ 980 million from $ 5.45 billion in 2001. Ford Credit had operating income of nearly $ 1.4 billion while the company’s automotive operations lost $ 539 million. Overall, the company reported an operating profit, excluding one-time charges, of $ 872 million. That was enough to give the company’s 95,000 hourly workers in this country a surprise — if slight — bonus of about $ 160 each.

By comparison, GM’s hourly workers are entitled to a $ 940 bonus.

Ford forecast operating earnings of 20 cents a share for the first quarter, four times the consensus estimate of analysts tracked by First Call. The company increased North American production for the quarter by 25,000 vehicles to just more than 1 million, 17,000 shy of 2001 levels.

“Our plan is working,” William Clay Ford Jr. said on a conference call with reporters and analysts. “We met or exceeded almost all of the targets we set for ourselves in 2002.”

Shares of Ford were mostly flat, falling 2 cents, to $ 10.14.

The company’s expectations for 2003, which it has said relatively little about yet, became somewhat clouded on Tuesday after it accidentally posted several slides projecting 2003 results on its Web site.

Ford executives discounted the slides as wrong and said they were mistakenly released for about 10 minutes. Because of strict new rules regarding disclosure, the company also submitted a securities filing explaining that the extra slides were “draft and/or preliminary materials prepared for background and scenario planning and contained a number of material inaccuracies.”

But Nicholas V. Scheele, the company’s chief operating officer, also addressed some of the specific forecasts in one of the slides during a question-and-answer session on the conference call.

Among the projections were a tripling of net losses in North America automotive operations this year and a huge swing in European automotive operations from break-even last year to a $ 1.5 billion net profit this year. Asked about such a sharp change in fortunes for Ford’s European operation, Scheele said it was related to bullish expectations for newer products like the Jaguar XJ sedan, the Volvo XC90 SUV and the Range Rover.

“Coupled with Ford of Europe continuing very aggressive cost reduction, performance will see a major turnaround,” Scheele said. But he also acknowledged that the company’s Ford brand, which sells cars like the Fiesta in Europe, could be vulnerable if the European market stalled.

The slides also included projections for net income of $ 15 million in South America, up from a nearly $ 300 million loss last year. Scheele said production would increase because a new facility in Brazil and cost efficiency improvements would improve performance.

“We would hope that effectively whatever happens, short of a major, major disruption in Brazil, we would see a break-even situation in Latin America,” he said.

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