Ford Posts Profit Drop, Cuts Production
Wed Apr 20, 2005 09:01 AM ET
DETROIT (Reuters) - Ford Motor Co. (F.N: Quote, Profile, Research) on Wednesday posted a 38 percent drop in first-quarter earnings, pressured by falling U.S. sales and rising costs, and further cut its North American production to reduce bloated inventories of unsold vehicles.
The second-largest U.S. automaker posted its results a day after General Motors Corp. (GM.N: Quote, Profile, Research) , its larger Detroit rival, reported its worst quarterly result since it skirted bankruptcy in 1992.
Ford's earnings were substantially higher than Wall Street had expected, and it affirmed its full-year outlook for earnings of $1.25 to $1.50 per share. The Dearborn, Michigan-based automaker revised its full-year earnings outlook on April 8 for the second time in less than a month.
Ford shares rose 2 percent in premarket trading on the Inet electronic brokerage network, from Tuesday's close of $9.28 on the New York Stock Exchange.
But Ford also said that for the second quarter it expects results to be in a range from a loss of 15 cents a share to break even, excluding special items. The outlook is well below analyst estimates of a profit of 39 cents a share.
JPMorgan analyst Himanshu Patel said the first quarter upside was impressive but added that the second-quarter outlook will likely disappoint investors.
The company appears to be preparing for an earnings recovery in the second half of the year that "may be somewhat optimistic given Ford's rising dealer inventories," Patel said in a research note.
Ford's first-quarter profit fell to $1.21 billion, or 60 cents a share, from $1.95 billion, or 94 cents a share, in the year-ago quarter.
Excluding special items, Ford said it earned 62 cents a share.
On that basis, Wall Street analysts on average expected Ford to earn 38 cents a share, according to Reuters Estimates.
Ford is wrestling with the same problems -- including rising health-care and raw material costs -- that caused GM on Tuesday to post a first-quarter net loss of $1.10 billion.
Both companies, which have been losing crucial U.S. market share to foreign rivals, face the risk that their credit ratings will be downgraded to "junk" status at any time and are under heightened pressure to cut costs. Continued ...
In its profit warning earlier this month, Ford also backed away from an ambitious 2006 profit goal.
During the first quarter, Ford said its core automotive operations earned $579 million before taxes and excluding charges, while its finance arm contributed $710 million.
Including charges, the automotive division earned $473 million before taxes.
Ford's revenue rose to $45.1 billion from $44.7 billion in the year-ago quarter.
PRODUCTION CUT
The automaker cut its second-quarter North American vehicle production by 3.7 percent to 905,000 units, from its previously announced target of 940,000 units.
Wall Street analysts watch vehicle production closely because automakers count earnings from cars and trucks when they are shipped to dealers, rather than when they are sold off dealer lots.
Ford's sales in the key U.S. market were down 5.2 percent through March and a troubling trend this year for Ford is the drop in sales of its mid-size and large sport utility vehicles, which are a major driver of profit. Ford blames high U.S. gasoline prices partly for the sales decline of 24 percent so far this year.
Going forward, the company will focus on strengthening its finances and cutting costs, Chairman and Chief Executive Bill Ford Jr. said in a statement.
During the first quarter, Ford's key North American vehicle operations earned $663 million before taxes, down from $1.96 billion a year ago. The company blamed lower sales, higher costs and unfavorable vehicle pricing environment for the drop.
Ford's luxury brands, grouped under the Premier Automotive Group, swung to a loss of $55 million before taxes compared with a pretax profit of $33 million in the year-ago period.
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