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Ford 4Q hit by soft sales
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January 18, 2001: 12:18 p.m. ET
Carmaker posts lower profit in line with warning; comfortable with 1Q estimate
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NEW YORK (CNNfn) - Softening demand for autos slashed earnings for Ford Motor Co., the world's second-largest carmaker, and stopped the company from giving guidance for 2001 results.
Ford posted fourth-quarter operating earnings of $1.2 billion, or 64 cents per diluted share, matching the lowered forecasts of analysts surveyed by First Call. Ford issued an earnings warning Dec. 21 as it announced it would cut production in January. In the year-earlier quarter, Ford reported earnings of $1.8 billion, or 83 cents a share, when adjusted for a share reimbursement plan during the year.
Henry Wallace, the company's chief financial officer, told analysts during a conference call that he is comfortable with forecasts of 54 cents a share in profit in the current quarter, but that was as far as he would go given current market conditions.
"Given the uncertainty about the direction of the economy, it's still a bit too early to make a call on the full year," Wallace said during the call.
 Wallace said Ford still agrees with the general industry projection that the current soft auto sales will rebound in the second half of the year and allow the industry to reach strong U.S. sales of 16 million to 16.5 million vehicles during 2001. But he said that it will take about a 2 percent growth in gross domestic product for this year and strengthening consumer confidence to meet that goal. And he said Ford is prepared to make the cuts it needs if the U.S. economy slips into recession.
"We feel bullish but not complacent going into 2001," he told reporters. "We'll be very decisive in making sure our production and stock levels are in line with demands."
First Call's forecast for Ford (F: Research, Estimates) stood at 53 cents a share for the first quarter Thursday morning and $2.59 a share for the full year. The company ended 2000 with earnings of $6.7 billion, or $3.26 a share, excluding special items, up 4 percent from 1999 results on a comparable basis.
Revenue declined 3 percent to $42.6 billion in the quarter, but rose 6 percent for the year to a record $170.1 billion.
Ford President Jac Nasser said, in the company's statement, that Ford "will face softening U.S. market conditions in 2001." But he added that the company remains focused on "delivering another year of strong financial results."
Ford will work on improving its cost structure and lowering production to meet demand this year. The company announced last week it plans to increase revenue by $5 billion while cutting total costs $1 billion. Wallace told CNNfn's In the Money that the company is well positioned to meet those goals, even with a slowdown in U.S. auto sales. (281KB WAV) (281KB AIFF)
Nasser also said the company must concentrate on improving its global performance.
"Our results outside North America, while improving, remained unacceptable in 2000," he said. "Our European operations are in the middle of a strategic restructuring and we expect a solid return to profitability this year. Our South American operations met their full-year 2000 milestone and will continue to improve this year."
Wallace also told analysts that the cost to Ford of the recall of 6.5 million Firestone brand tires primarily used on its vehicles came to $250 million in the most recent quarter, bringing total costs to about $500 million, not counting litigation. He would not give a cost of litigation settlements already concluded nor give estimates of future litigation costs, saying only that Ford had sufficient reserves to handle it.
Wallace said that he believes Ford is in the best profit position of its major competitors. The Chrysler Group of DaimlerChrysler (DCX: Research, Estimates) is losing money and saw its industrial cash reserve drop to zero at the end of last year. General Motors Corp. (GM: Research, Estimates), the world's largest automaker, said when it released earnings Wednesday that it would be testing its break-even point in the current quarter, well below earlier estimates for the period.
"When we look at profitability in comparison to competitors, we're in good position," he said. "We have the fundamentals in place, strong brands, strong products, and a strong balance sheet."
Ford shares gained 38 cents to at $27.25 in trading Thursday.
-- from staff and wire reports 
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