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Ford loses $5.1B, warns
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January 17, 2002: 11:31 a.m. ET
No. 2 automaker sees breakeven '02 after posting first annual loss since '92.
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NEW YORK (CNN/Money) - Ford Motor Co. Thursday reported a $5.1 billion fourth-quarter loss, its first annual loss in nine years, and warned that further red ink will make it miss forecasts for this year.
Ford Chief Financial Officer Martin Inglis said that while the world's No. 2 automaker expects to return to profitability at some point later this year, the losses will continue this quarter, and the company only expects to be around breakeven on an operating basis this year, a result that would put it below current forecasts. Analysts surveyed by earnings tracker First Call are looking for a 4 cent a share loss in the first quarter, and earnings per share of 29 cents for the full year.
"Everyone recognizes Ford is going through a difficult period," he told analysts Thursday. "We feel we've put together a good revitalization plan, but it is clear that 2002 will be somewhat a year of transition while that goes into place."
Shares of Ford (F: down $0.23 to $14.72, Research, Estimates) lost ground in morning trading Thursday following the financial report and warning.
The company's restructuring plan, unveiled Friday, will close five North American plants and cut 35,000 jobs worldwide in the coming years, as well as discontinue some formerly popular models and cut the dividend.
The company's fourth quarter results actually were slightly better than analysts' forecasts. Excluding $4.2 billion in charges primarily related to the restructuring plan, the company lost $860 million, or 48 cents a share, in the quarter, compared with earnings of $1.21 billion, or 64 cents a share, on the same basis a year earlier. First Call's forecast had called for a 50 cents a share loss.
The quarter's results push the company's operating results for the year into the red, as it lost $782 million, or 44 cents a share, excluding special items, making it the first operating loss it has reported since 1992. The company earned $6.7 billion, or $3.26 a share, on the same basis a year earlier.
Including the charges, the fourth-quarter net loss came to $5.1 billion, or $2.81 a share, compared with net income of $1.1 billion, or 57 cents a share, a year earlier. For the full year Ford reported a net loss of about $5.5 billion, or $3.02 a share, compared with 2001's net income of $3.5 billion, or $2.30 a share.
Due to the results Ford also said there will be no 2001 profit-sharing for hourly U.S. workers, or bonuses and other compensation benefits for salaried workers.
Overall revenue at the company fell 3 percent to $41.2 billion from $42.6 billion, as worldwide vehicle sales in the quarter declined just less than 2 percent to 1.80 million vehicles from 1.84 million a year earlier.
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A key part of the loss was due to the cost of incentives, such as the zero-interest financing offer on most models offered in response to a move by General Motors Corp. (GM: up $0.38 to $50.13, Research, Estimates) shortly after the Sept. 11 terrorist attack. Wednesday GM reported better-than-expected fourth quarter results, although profits were far below year-earlier levels.
While those incentives, which are considered part of marketing costs, helped keep sales strong in the face of the weakening U.S. economy, they ate away at any chance of profitability for Ford in the period. Ford saw marketing costs climb to 16.7 percent of overall revenue in the period, up from 10.7 percent in the year-earlier period.
Ford has recently announced a new round of up to $2,500 cash back on new models as it again tries to stay competitive with GM incentives. Inglis said that first quarter marketing costs should be closer to the 16.0 percent of revenue level it saw in the third quarter, but that full-year marketing costs this year will be above the 14.7 percent level it posted over the course of 2001, although less than the 16.7 percent level hit in the fourth quarter.
The company estimated total 2002 U.S. vehicle demand of 15.5 million units, including large trucks, although Inglis said that early January sales are performing better than expected.
Ford statistics showed that it actually posted a slight gain in U.S. market share in the fourth quarter, helped by the high incentive levels that were not matched by some of the import models that have been making gains here. But overall the company lost market share for the year.
Inglis said that the Ford brand is expected to show some continued loss in market share for the year, although other brands in the company's premier auto group, including Lincoln, Volvo and Jaguar, are expected to show improved U.S. market share this year. He also expects the company to show some market share improvement in Europe. 
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