Ford Closes Books on a Dismal 2001

Capping a disastrous year, Ford Motor Co. on Thursday reported its second-deepest quarterly loss ever, saying it lost $5.05 billion in the fourth quarter after a massive restructuring charge.

Ford’s net losses amounted to a staggering $5.45 billion after charges, or $3.02 a share, for 2001, a year marked by embarrassing quality and customer service setbacks, billions spent on the Firestone tire recall and fierce discounting, and the ouster of the auto maker’s chief executive.

The announcement of the loss came less than a week after the world’s second-largest auto maker revealed a turnaround plan that includes shedding 35,000 jobs, closing five factories in North America and slashing costs to raise profit by $9 billion by mid-decade.

“This was a challenging, difficult year for the Ford Motor Co. and our financial performance was unacceptable,” Chairman William Clay Ford Jr. said in a statement.

“As outlined in our revitalization plan, we are committed to regaining our momentum and getting back on track,” he said.

Ford’s fourth-quarter loss was $860 million on an operating basis. For the full year, Ford’s operating loss was $782 million, or 44 cents a share, a spectacular drop from operating profit in 2000 of $6.67 billion that raised visions of passing General Motors Corp. as the world’s largest auto manufacturer.

“It was the expected disaster. Ford is hemorrhaging red ink all over the place,” said Burnham Securities auto analyst David Healy. “I think the fact that they are heading for flat market share for the Ford brand over the next few years indicates that they’ve given up hopes of overtaking GM.”

On Wednesday GM reported a net profit in 2001 of $601 million on sales of $177 billion.

Ford’s revenue in 2001 was $162.4 billion, down 5% from $170.1 billion a year ago, while vehicle unit sales were 6.99 million, a 6% decline from 7.42 million. U.S. market share fell to 22.8% from 23.7% the previous year.

“The erosion of industry pricing, Ford’s U.S. market share losses and obvious cost problems depressed Ford’s results in late 2001,” said Merrill Lynch auto analyst John Casesa.

“Many of these same forces will be at work in 2002,” Casesa said. “Ford is beginning to confront the hailstorm of problems that always seem to occur simultaneously once an auto company’s business model cracks.”

Ford shares declined 25 cents to close at $14.70 on the New York Stock Exchange.

It was the worst quarterly loss for Ford since the first quarter of 1992, when the auto maker lost $6.7billion because of accounting adjustments for retirement benefits. Overall, Ford lost $7.6 billion that year.

Ford was forced to match GM’s zero-interest financing for the last four months of 2001, a costly scheme to lure customers back to showrooms after the Sept. 11 terrorist attacks.

As a result, marketing costs skyrocketed to 16.7% of revenue in the fourth quarter, compared with 11.1% in all of 2000.

Ford’s fourth quarter included a $4.1-billion charge for the restructuring plan, under which hourly workers will get no profit-sharing checks this year, and William Ford will draw no salary or bonus for at least a year.

The company said last week that it will break even in 2002 before improving profit.

Ford will try to raise about $1billion by selling non-core assets this year, and is preparing to sell $3billion of convertible securities next week, Chief Financial Officer Martin Inglis said Thursday.