‘Ugly’ year seen for Ford
Despite posting a sharply narrower first-quarter loss Thursday, Ford Motor Co. still faces daunting obstacles on its road to recovery.
Ford executives said progress was being made in turning around the No. 2 U.S.-based automaker, citing significant cost cutting and strong sales of new vehicles such as the Edge crossover. But Wall Street is still in “show me” mode.
“The rest of the year is going to look pretty ugly,” said Shelly Lombard, a fixed-income analyst with research firm Gimme Credit. “It’s too early to pop the Champagne. They’re doing the right things, but this is just the first inning of what’s going to be a very long game.”
Chief Executive Alan Mulally, hired away from Boeing Co. in the fall to lead Ford’s restructuring, acknowledged as much during a conference call with analysts Thursday morning.
“This has been an encouraging quarter for the company, but turning around the business will not be a quick or an easy process,” Mulally said. “We have a plan and we are on track.”
Most of the improvement in Dearborn, Mich.-based Ford’s performance came overseas. Profit was up at the Premier Automotive Group, which consists of the Volvo, Jaguar and Land Rover brands, and at Ford’s European and Latin American operations.
But the key North American market continued to falter, racking up a pretax loss of $614 million, compared with a loss of $442 million a year earlier. Moreover, Ford expects the $5.1-billion loss it posted for its automotive operations in 2006 to widen this year.
Mulally blamed the North American results on falling U.S. market share and the shift in customer preferences from pickups and sport utility vehicles toward more fuel-efficient cars.
Ford’s U.S. market share in the first quarter fell to 16.4%, down from 18.7% a year earlier, according to Autodata Inc. Planned cutbacks in low-profit sales to rental companies and corporate fleets accounted for some of the falloff, but sales of SUVs and full-size pickups -- key sources of profit in recent years -- were off sharply.
In addition to high gasoline prices, Chief Financial Officer Don Leclair said, the housing slowdown was also hurting sales.
“We are facing significant head winds for the remainder of the year,” he said.
For the first three months of 2007, Ford reported a loss of $282 million, or 15 cents a share. That was down from a loss of $1.42 billion, or 76 cents, for the first quarter of 2006.
It was Ford’s seventh straight quarter of red ink. But the automaker said its loss from continuing operations was 9 cents a share, well below the 60 cents a share analysts had forecast.
Ford shares gained 32 cents, or 4%, to $8.20 as investors bet that the overhaul launched by Mulally’s predecessors in January 2006 was making progress.
Mulally said Ford remained committed to returning to profitability by 2009 and noted that expenses were slashed by $500 million during the first quarter.
The company is trying to reduce annual costs in its North American auto operations by $5 billion by 2008. Under the plan, 16 plants will be closed, and 38,000 blue-collar workers have accepted buyout offers. The company is reducing its white-collar workforce by a third, or about 14,000 jobs.
Also Thursday, Nissan Motor Co. marked its first drop in annual profit in seven years and CEO Carlos Ghosn acknowledged that Japan’s No. 3 automaker would need an extra year to meet a key production target.
Higher raw material costs as well as incentives -- discounts to woo buyers -- and a lack of new models hurt Nissan’s performance, Ghosn told reporters.
Nissan said its group net profit plunged 54% in the January-to-March quarter to 70.6 billion yen ($595 million), down from 152.4 billion yen, as job-reduction costs and higher taxes offset improved sales. Quarterly sales rose 7% to 2.8 trillion yen.
Including an accounting change to take care of some subsidiaries shifting annual earnings periods from the calendar year to a fiscal year starting in April, Nissan said profit fell 46% during the quarter to 82 billion yen. That number adds an extra quarter from those subsidiaries.
The Associated Press was used in compiling this report.
