Ford Profit Off 58%; Slow Sales, New Models Cited
Ford Motor Co. on Wednesday reported a 58% decline in fourth-quarter earnings, suffering from slower auto sales, costly model introductions, higher incentive payouts and some problems abroad.
Ford’s weak performance, which was expected, contrasts with those of Chrysler Corp. and General Motors Corp., which this month reported record fourth-quarter earnings.
For the quarter, Ford earned $660 million, or 49 cents a share, down from $1.5 billion, or $1.47, in the year-before period. For all of 1995, Ford had a profit of $4.1 billion, or $3.58 a share, compared with a record $5.3 billion, or $4.97, for ’94.
Until recently, Ford was the most admired U.S. auto maker. It has a strong balance sheet and five of the nation’s 10 best-selling vehicles. But now it is under fire for its high development costs and introduction of high-priced models laden with expensive technology.
For instance, sales of its all-important Ford Taurus mid-size sedan, the nation’s top-selling car for the last three years, were disappointing last fall, apparently because of the higher price and radical new styling of the ’96 model.
Outside North America, Ford lost money for the quarter. It struggled in a competitive market in Europe and also suffered some losses because of currency fluctuations. It was also hurt in Brazil, where the government imposed regulations favoring small, locally built cars, and in Mexico, where the peso devaluation has decreased auto sales drastically.
Still, Ford’s earnings were higher than some analysts had anticipated. But the difference was largely due to lower tax rates charged on some foreign earnings and a one-time gain from the dissolution of a joint venture with Volkswagen in Brazil.
“The results were terrible, as expected,” said David Healy, analyst for Burnham Research. “Ford’s automotive earnings have all but disappeared for the short term.”
Ford said earnings should improve in the second half of this year, once it has worked through the cost of launching the ’96 Taurus, Escort subcompact and F-Series pickup truck models. In addition, sales could be boosted by lower interest rates. The Federal Reserve Board cut rates Wednesday.
“We look for gradual improvement in profitability during 1996, providing that our major markets show the moderate economic growth throughout the year that we expect,” Ford Chairman Alex Trotman said.
Ford’s stock was unchanged at $29.50 in trading Wednesday on the New York Stock Exchange.
The losses overseas more than offset the profit earned by Ford’s domestic car and truck business, leaving its worldwide automotive operations with earnings of just $16 million. Its financial services arm logged a profit of $644 million.
Together, the Big Three U.S. auto makers earned $13 billion in 1995, making it the second-most profitable year ever for the domestic industry. The No. 1 year was 1994, with earnings of $13.9 billion.
At a Glance:
Philip Morris Cos., the nation’s largest cigarette maker, said it earned $1.3 billion, or $1.53 a share, for the fourth quarter, compared with $1.1 billion, or $1.27, a year ago. . . . Netscape Communications Corp. posted better-than-expected net income of $2.36 million, or 6 cents a share, for the fourth quarter, compared with a loss of $7.46 million, or 22 cents, for the period a year ago.
