Ford Posts Loss, Warns of More Cuts

Ford Motor Co. posted a third-quarter loss of $284 million Thursday -- its first deficit in nearly two years -- and warned that it would probably announce additional layoffs and plant closings in January to shore up its ailing North American auto unit.

The automaker, which lost $13 million a day in North America during the quarter, is hurting from a consumer shift away from its gas-guzzling SUVs, lofty labor expenses, rising materials costs and excess factory capacity.

The company needs “a dramatically different business structure,” Ford Chief Executive William Clay Ford Jr. said in a call with analysts.

Ford’s cost-cutting plan probably “will include significant plant closures” and job cuts “from top to bottom,” he said. The company also is negotiating with the United Auto Workers about healthcare spending cuts, similar to the $3 billion in annual concessions that General Motors Corp. announced with the union Monday when it reported a $1.6-billion loss for the third quarter.

Some analysts expected Ford to announce details of its overhaul Thursday. But the automaker only recently named new executives to head its North American auto group, and it needed more time to propose changes.

Ford’s announcement added to what many are calling a momentous juncture in U.S. automotive history. GM, Ford and the Chrysler division of DaimlerChrysler, along with giant auto-parts makers such as bankrupt Delphi Corp., are headed toward a massive streamlining if they hope to survive competition from lower-cost Asian producers such as Toyota Motor Corp. and Honda Motor Co.

“The future arrived faster than we expected because of this year’s sharp spike in fuel prices,” Bill Ford said, adding that the shift spawned “a renewed sense of urgency” at the automaker. “Our industry is beginning a dramatic restructuring which is sorely needed.”

Dearborn, Mich.-based Ford has 324,000 workers worldwide and sells vehicles on six continents under the Ford, Lincoln, Mercury, Jaguar, Volvo, Land Rover and Aston Martin brands.

But in the third quarter Ford’s big problem again was its North American auto group, which had a pretax loss of $1.2 billion, its fourth unprofitable quarter in the last five. This latest loss came despite summer sales gains from the popular employee-pricing discount plans that were offered by Ford, GM and Chrysler.

Ford’s $284-million overall quarterly loss, or 15 cents a share, contrasted with a profit of $266 million, or 15 cents a share, a year earlier. Third-quarter revenue rose 5% to $40.9 billion from $39.1 billion.

Its North American division has lost $2.4 billion in the last 15 months, raising the pressure on Ford to quickly restructure.

Analyst David Healy of Burnham Securities Inc. expects Ford to close three of its 19 North American assembly plants. “With their sharp decline in market share, they have frankly got too much capacity, too many plants, too many people to be profitable,” he said.

Ford’s stock price has plunged 43% this year, even more than GM’s 29% decline over the same period. Ford, which traded above $55 a share in 2000, closed Thursday at $8.42 a share, down 5 cents for the day.

Unlike GM, which faces the challenge of a major outside investor in billionaire Kirk Kerkorian, the Ford family still controls 40% of its stock.

Bill Ford, 48, great-grandson of founder Henry Ford, assumed the CEO’s job in 2001, when Jacques Nasser was ousted.

Still, there has been recurring speculation that Ford is willing to cede the top post to another executive. He tried to put the speculation to rest Thursday, telling analysts that “I will be in charge of this effort without any reluctance whatsoever.”

In recent years, Ford has heavily relied on big pickup truck and SUV sales to power its earnings. But demand quickly faded this year as gas prices soared above $3 a gallon.

Ford’s U.S. sales of its trucks and SUVs fell 27% last month, while its overall domestic market share fell to 18.9% last month from 19.7% a year earlier, according to Autodata Corp. A decade ago it was 26%.

The shift from big SUVs also exposed Ford’s weakness in passenger cars, with the notable exception of the popular new Ford Mustang. Ford is trying to remedy that problem with new sedans this year such as the Five Hundred and the Fusion.

Ford also is trying to introduce more energy-saving hybrid vehicles, such as the Escape Hybrid SUV. It’s too early to tell whether these new vehicles will enable Ford to regain ground on its rivals, analysts said.

Long ago, Henry Ford created the revolutionary assembly line, and in 1914 he doubled his workers’ pay to what was then an unheard-of $5 a day to keep them motivated.

But in recent decades, lucrative contracts with the United Auto Workers have piled up so-called legacy labor costs, including retirees’ healthcare costs, that have put Ford and GM at a disadvantage with lower-cost Asian rivals.

Ford is negotiating with the union about potential cuts, but Bill Ford declined to be specific, partly because the company was waiting for details of GM’s pact.

Last month, when he named Ford executive Mark Fields, 44, to oversee the North American business, Bill Ford told Fields “to do what’s necessary” to fix the business. But Wall Street is expressing doubts that the fix will happen quickly.

“They seem to be groping right now” for the right strategy, said George Magliano of consulting firm Global Insight Inc. in New York.

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Reuters was used in compiling this report.