Ford drives past forecasts
Troubled No. 2 automaker overcomes losses in auto operations to post much better-than-expected profit.
NEW YORK (CNNMoney.com) - Ford Motor Co., hours ahead of an expected announcement about thousands of job cuts and widespread plant closings, posted much better-than-expected fourth quarter earnings Monday.
The nation's No. 2 automaker said it overcame losses at its core North American auto operations to earn $511 million, or 26 cents a share, excluding special items in the quarter. Analysts surveyed by earnings tracker First Call had forecast only a 1-cent a share profit in the period.
The company earned $554 million, or 28 cents per share, on that basis a year earlier.
Much of the earnings came from its credit unit as well as overseas auto operations. North America automotive operations reported a pre-tax loss of $143 million. Still, that was an improvement compared to a pretax loss of $470 million in 2004. But it left Ford's North American automotive with a full-year pre-tax loss of $1.6 billion, compared with about $1.4 billion in pre-tax profits at the unit in 2004.
The other regions did well by comparison. South and Latin America made $128 million profit while Europe went from a year-earlier loss to a profit of $66 million. The Premier Auto Group, which includes luxury brands sold both in North America and in Europe -- such as Volvo, Jaguar and Land Rover --earned $46 million. Together those three units had a $520 million improvement over year-earlier results. Only the Asia-Pacific region had a loss and a negative result compared to a year ago.
Overall net income in the quarter came to $124 million, or 8 cents a share, up from $104 million, or 6 cents a share, a year earlier. Among the charges affecting net income, the company took 68 cents a share in charges related to personnel reductions and the writedown in value of some of its Land Rover and Jaguar assets, but had it had a 50 cent a share gain from its sale of Hertz, its car rental business.
The personnel reductions were not related to plant closings set to be announced later Monday.
Revenue in the quarter rose to $47.6 billion from $44.9 billion a year earlier, as revenue from worldwide auto sales rose to $41.8 billion from $38.9 billion, topping analysts' forecast of auto revenue of $37.3 billion.
The announcement of widespread plant closings and deep staff cuts was expected around 10:30 a.m. ET Monday.
Ford has seen U.S. auto sales fall each of the last six years, with its overall U.S. sales down more than 1 million vehicles, or 26.6 percent, since 1999.
With American car buyers turning away from traditional large SUVs last year, Ford's sales fell nearly 5 percent to less than 18 percent of the market, down from more than 25 percent of the market 10 years ago.
Company executives have been signaling for several months that deep changes are needed. Mark Fields, president of Ford auto operations in the Americas, said it a speech earlier this month that American automakers had to "Change or die."
Published reports suggest that the assembly plants most at risk of closing are in Atlanta, St. Louis, St. Paul, Minn. and Wixom, Mich., as well as St. Thomas, Ontario, and Cuatitlan, Mexico. As many as 25,000 to 30,000 employees could be trimmed as part of the cutback.
Both companies have recently won agreements from the United Auto Workers union to trim their spending on health care costs, but the companies still face higher health care spending on both active and retired employees than their Japanese competitors. Both have also seen their credit ratings cut to junk bond status. Ford said that it's U.S. health care spending in 2005 came to $3.5 billion, or about $1,100 per vehicle sold. That was up from $3.1 billion in 2004.
For more details on Ford's fight for survival, click here.