Ford Posts $5.07 Billion Loss

DEARBORN, Mich. – Ford Motor Co. on Thursday reported a net loss of $5.07 billion for the fourth quarter of 2001, as it braced for a restructuring including tens of thousands of job cuts and the closing of at least five North American plants in a bid to return to profitability.

The fourth-quarter loss compared with a net profit of $1.1 billion in the same period a year earlier. It closed the books on a horrific year for the world's second-largest automaker, which posted its first annual loss since 1992 due to problems including the Firestone tire crisis, poor quality, costly recalls and a heated incentives war amid the U.S. economic slowdown.

Ford's financial results included an after-tax charge of $4.1 billion against fourth quarter results in connection with the restructuring plan it unveiled last Friday. Additionally, there was a $102 million noncash charge for a change in accounting standards.

The company, which posted a combined net loss totaling $1.4 billion in the second and third quarters of 2001, incurred a fourth-quarter loss before one-time items of 48 cents per share, compared with operating earnings of 64 cents per share in the fourth quarter of 2000.

Wall Street estimates for the fourth-quarter operating loss per share had ranged from 53 cents to 49 cents, with a consensus analysts' forecast of 50 cents.

Ford's total sales and revenues in the fourth quarter fell 3 percent to $41.15 billion from $42.59 billion in the same quarter a year earlier.

With its fourth-quarter results, Ford posted a full-year net loss of $5.45 billion, its first annual loss since 1992. The Dearborn, Michigan-based automaker, which ousted its hard-knuckled former chief executive Jacques Nasser in October, reported a net profit of $3.5 billion in 2000.

All of Detroit's Big Three automakers have been hurt by the U.S. recession, overcapacity and growing competition from Asian and European automakers. But Ford, which cut its dividend last week for the second time since October, has been hardest hit by the economic slowdown, dwindling cash reserves, credit losses and shrinking U.S. market share.

By comparison, General Motors Corp., the world's largest automaker, reported fourth-quarter earnings of 60 cents per share on Wednesday, reflecting stronger-then-expected U.S. vehicle sales. GM's fourth-quarter results were down 58 percent, however.

Ford's shares have underperformed GM's by about 20 percent since the September 11 attacks on the United States.

OVERHAUL PLAN

As part of its turnaround plan, Ford announced last Friday that it was cutting 10 percent of its work force, or 35,000 jobs worldwide, slashing production capacity by about 16 percent, killing off four low-profit vehicles and closing as many as seven North American plants.

Ford Chief Operating Officer Nick Scheele also said Ford would try to raise about $1 billion from the sale of non-core assets this year. Those assets include the Kwik-Fit auto repair chain Ford operates in Europe and two small U.S.-based businesses: Collision Team of America, a chain of collision repair centers, and Greenleaf LLC, a chain of automotive recycling centers.

If everything worked according to its plan, Ford would break even in 2002 through $2 billion in pretax profit improvement this year, and achieve $9 billion by the middle of the decade.

But the plan assumes that the U.S. market will continue to support sales of 16 million new vehicles a year, and that market share for the Ford brand will hold steady at 19 percent -- even though Ford is cutting models and has no new major vehicles before 2004.

In a statement on Friday, Scheele said Ford sees total U.S. vehicle demand coming in at about 15.5 million units this year. He added that Ford's first-quarter North American production forecast calls for making 1.05 million cars and trucks, down 3 percent from the same quarter in 2000.

DOWNGRADES, CASH FLOW

Wall Street analysts have given the turnaround plan a mixed review, and the reaction from U.S. credit rating agencies has been decidedly negative.

Standard & Poor's revised its outlook for Ford to ''negative'' from ``stable'' after the plan was announced, and Moody's Investor Service downgraded the company outright late on Wednesday. Fitch, meanwhile, downgraded Ford last week.

One of the problems, as many industry analysts see it, is that Ford will have to get through tough negotiations with the Canadian Auto Workers union next summer, and the United Auto Workers union next year, before it can proceed with its plan to shut down plants in the United States and Canada.

Additionally, it remains to be seen how Ford will generate enough cash and revenues to make good on its plan to start introducing a yearly average of 20 new vehicles across its diverse brands of cars and trucks by the middle of the decade.

Ford's net cash position at the end of 2001 stood at $3.9 billion, down 52 percent from $8.1 billion at the end of 2000.