Ford reports largest loss in company history

Ford posts wider than expected loss

By Poornima Gupta 38 minutes ago

Ford Motor Co (NYSE:F - news) on Thursday capped the worst year in its 103-year history with a deeper-than-expected fourth quarter loss and said it would cut its production for the current quarter and lose market share through September.

The No. 2 U.S. automaker posted a fourth-quarter net loss of almost $5.8 billion, or $3.05 per share, on declining sales of its profitable trucks and charges for employee buyouts. That compared to a loss of $74 million, or 4 cents per share, a year ago.

Ford's loss from continuing operations was $1.10 cents a share, which was wider than the average Wall Street analyst expectations of a loss of 94 cents per share as tracked by Reuters Estimates.

The company posted a record loss of $12.7 billion for 2006, leaping past Ford's previous record net loss of $7.39 in 1992.

Ford shares slipped initially in pre-market trade and then recovered to be unchanged from Wednesday's close of $8.20 on the New York Stock Exchange.

Ford, which is in the early stages of a four-year turnaround plan that includes closing 16 plants and cutting up to 45,000 jobs in North America, said charges reduced fourth-quarter results by $3.7 billion after taxes, or $1.95 per share.

Ford expects its U.S. market share will fall through the third quarter as it pulls back from sales to car rental companies and other fleet operators.

The company suspended its practice of providing detailed financial forecasts a year ago.

The Dearborn, Michigan-based automaker also said its production would be down through the first half of the year but increase on a year-over-year basis in the second half.

Ford cut its previously-announced first quarter production target in North America by 10,000 units to 740,000 vehicles, a 15.5 percent decline from the same quarter a year ago.

REVENUE DOWN, CASH BURN IN FOCUS

Fourth-quarter revenue totaled $40.3 billion, down from $46.3 billion from the same period a year ago. Auto sales were $36 billion, down from $40.7 billion from a year earlier.

Ford repeated its forecast that its cash burn, including restructuring expenses, would be about $17 billion between 2007 and 2009, with $8.5 billion of that outflow this year.

Ford last month took the unprecedented step of mortgaging assets, including its U.S. plants, to borrow over $23 billion to fund the cash burn it expects.

The company projected that its own capital spending would be about $7 billion in 2007.

Ford expects U.S. industry wide auto and truck sales would total about 16.8 million units in 2007 with overall incentive spending higher.

That would imply a roughly flat U.S. market for sales of cars and trucks, in line with many industry forecasts.

Ford cut North American production 22 percent in the fourth quarter and completed a buyout offer with unionized factory workers that cut 38,000 jobs. Its U.S. sales dropped 8 percent drop for the year.

Another Iraq casualty: U.S. auto industry

December 12, 2006

BY JESSE JACKSON

One casualty of the debacle in Iraq seldom gets much press, but the inevitable focus on the mess in Iraq too often overshadows other vital challenges.

The American automobile industry is hemorrhaging. Today, Ford will announce that it will offer buyouts to 85 percent of its salaried work force. Ford is looking to lay off a staggering 52,000 employees by September 2007. Chrysler has already been merged with the German automaker Daimler-Benz. General Motors is gushing red ink.

This industry has been America's industrial stronghold since Henry Ford perfected the assembly line. After World War II, President Eisenhower's defense secretary, Charlie Wilson, wasn't far off when he said, ''What's good for America is good for General Motors and vice versa.'' GM was America's signature company. Its unionized employees won what became the foundation of the American Dream: secure jobs that paid a family wage, with health care, pensions and paid vacations.

Now that social contract is being shredded by the global marketplace. The foolish, ideological commitment to mindless trade policies over the last several decades has devastated Detroit. U.S. automakers must now compete with companies from Europe and Japan that bear no health care costs.

General Motors has about three retirees for every one autoworker; Ford has two for every active employee. Toyota in this country has about 100 retirees in total. The health care and pension costs put U.S. automakers at a staggering cost disadvantage: over $1,200 a car. If they compete on price, they lose money. If they don't compete, they lose market share.

At the same time, we desperately need the industry to move to hybrid and alternative-fuel cars. Detroit is ready to build cars that use alternative fuels made from corn or grasses. But the oil industry that resists putting in the E85 (85 percent ethanol) pumps. These would cut the demand for oil drastically -- and put a crimp in their record profits.

The Ford layoffs alone will hit Michigan, New Jersey, Georgia, Missouri and Ohio big-time, and states like Kentucky will feel the pain. It won't stop with the auto jobs. The auto suppliers, housing markets, hotels, the retail industries that depend on the demand generated by relatively well-paid auto employees will be depressed. We see the pain caused by the steel industry's decline. But the steel industry is a pimple compared with the rash of economic losses that the decline of Detroit will cause.

Obviously, this crisis requires urgent, intense national action. Are we prepared to let the auto industry die? If not, what steps can be taken to relieve the burdens of their health care and pension costs? What should be expected from the automakers in return in terms of investment, jobs guarantees, fuel efficiency and alternative-fuel cars? What penalties or incentives should be provided to the oil industry to force proliferation of alternative-fuel pumps in gas stations? How does all this fit into a concerted drive for energy independence?

Yet when the CEOs of the auto industry sought to meet with George W. Bush before the election, he canceled two meetings with them. When they finally met, an obviously distracted president gave them all of one hour, and nothing was decided.

This is catastrophic. Understandably, the president and his advisers are focused on what may be the worst foreign policy debacle in our history, in Iraq. But the collapse of Detroit may well be the equivalent defeat in our economic history. Surely our auto companies' futures cannot be left to a market in which their competitors enjoy massive state subsidies and mercantile trade policies. We need a considered national policy for our industrial future.

We tend to think of Iraq as a crisis ''over there.'' In fact, it is taking casualties here at home. The cost of the war is evinced not just by the brave men and women who are sacrificing life and limb, not just by the literal trillions of dollars that will be wasted, but by the collapse of America's own economy. It remains neglected as our leaders focus on troubles abroad rather than threats here at home.