THE STRUGGLING AUTO BUSINESS : THE INDUSTRY : Ford Loses $2.3 Billion; Daihatsu Quits U.S. Market : * Cars: But a pattern of strengthening sales during the past five weeks has encouraged the second-largest auto maker.
Amid signs that the car business is picking up, Ford Motor Co. said Thursday that it lost $2.3 billion in 1991, the worst year in its 89-year history.
Ford lost $476 million in the October-December quarter, slightly more than analysts feared, as the red ink in both its North American and overseas auto operations overwhelmed profits generated by some of its financial businesses.
Ford declined to say whether it expects to record a profit for this year, cautioning that any recovery will be slow and that most of the conditions that made 1991 so difficult still prevail.
But a pattern of strengthening sales over the past five weeks in the U.S. market has encouraged Ford and the rest of the auto industry. A Ford executive said that he was “cautiously optimistic” and that the company expects a “substantial” improvement in its financial condition as the year unfolds.
The latest sign was Thursday’s auto sales report for early February, which showed a 24% gain in sales of North American-built cars.
Ford and the other auto producers dearly hope that the gains continue. When General Motors checks in next week with its year-end results, the Big Three U.S. firms are expected to show a loss of more than $6 billion, easily their worst drubbing ever. Chrysler, though slightly profitable in its fourth quarter, lost $795 million for the year.
In addition to a prolonged recession that kept consumers out of automobile dealerships, the U.S. industry last year lost more ground to Japanese-based competitors and was forced to offer lavish discounts of up to $1,200 per vehicle to capture what sales it could.
“Many of the problems that affected us in 1991 are continuing into 1992: soft economies, intense competition and excess industry capacity,” said Harold O. Poling, Ford’s chairman and chief executive.
But David N. McCammon, Ford’s treasurer and vice president of finance, said the company’s current orders from U.S. dealers for new cars and trucks are 40% higher than they were a year ago. That is partly to replenish inventories but also reflects increased customer traffic in showrooms, he said.
The vehicle sales remain at historically weak levels, McCammon noted. But the discounts needed to close deals have declined to about $850 from $1,000 a car, he said, and Ford’s sales are less dependent on fleet orders this year. That indicates that it is the consumer who is buying the cars.
“That’s what I find so encouraging,” McCammon said.
Investment analysts consider Ford in the best shape of Detroit’s Big Three, despite under-investment in new cars and trucks in the late 1980s that has weakened its competitive position in several car lines. Ford, considered the low-cost producer among U.S.-based auto makers, cut additional fixed costs last year.
Such efficiencies could make it easier for Ford to resist the temptation that Detroit will increasingly face this year: to raise prices as the recovery takes hold and if, as expected, Japanese auto makers raise their prices in a partly political gesture to limit their sales here.
“The question is whether Ford and the rest of Detroit this time around will raise prices to regain profitability or hold the line in order to win back market share from the Japanese,” said analyst David Garrity of Nomura Securities Research in New York.
But analysts expect Ford to lose heavily again in the first quarter before slowly returning to profitability. Maryann Keller, of Furman Selz Inc., projects a first-quarter loss of $450 million and a break-even performance over the final three quarters.
Highlights of Ford’s financial statement:
* The per-share loss came to $1.03 per share in the fourth quarter, against a $1.11 loss, or $518 million, a year ago. The slight improvement came despite a 9% decline in revenue, to $22 billion, evidence that its cost-cutting efforts took hold late in the year.
* The record 1991 loss equaled $4.79 per share, following the previous year’s earnings of $860 million, or $1.86 per share. Revenue fell 10% to $88.29 billion.
* Ford ended the year with $9.75 billion in cash and marketable securities on hand, up more than 50% from a year earlier, as a result of new borrowings and the sale of $2.7 billion in preference stock. The cash is critical to Ford’s ability to pay the tab for developing new vehicles in the 1990s.
* The company’s struggling Jaguar subsidiary in Great Britain suffered a $100-million operating loss in the fourth quarter and a $350-million loss for the year as car sales tumbled 40%. But the company claims that quality has improved 60%.
* Ford lost $2.2 billion on its U.S. auto operations and $970 million overseas. Most of the overseas loss came at Jaguar and Ford of Britain, both dependent on the hard-hit British economy.
* Ford’s Financial Services Group posted a 22% rise to record earnings of $927 million. But San Francisco-based First Nationwide Financial, Ford’s savings and loan, lost $25 million in the quarter and $73 million for the year because of bad loans on apartments and commercial real estate.
Times staff writer James Bates in Los Angeles contributed to this report.
Ford’s Worst Year
Ford Annual earnings:
‘91: -$2.3 billion
Ford Annual revenue:
‘91: $88.29 billion
Source: Company reports
