Ford posts $1.4 billion first-quarter loss
DEARBORN, Mich. - Ford Motor Co. reported a first-quarter loss of $1.4 billion Friday and said it depleted less of its cash, emphasizing that it doesn’t expect to seek any of the government assistance that is keeping the rest of the Detroit Three alive.
The nation’s second-largest automaker said it spent $3.7 billion more than it took in during the first three months of the year, far less than the $7.2 billion it spent in the fourth quarter of 2008.
Chief Financial Officer Lewis Booth said the company is confident that it will slow the drain on its cash even further this year, and he said Ford will make it through 2009 without needing government aid. He would not speculate, however, about 2010.
“This is a very, very difficult environment,” Booth said. “We’re comfortable we’ll get through this year.”
Ford said it cut structural costs by $1.9 billion, adding that it is likely exceed its $4 billion cost-cutting goal for the year.
“We are off to a very good start,” CEO Alan Mulally said in a conference call with reporters. “So we believe that we will be able to exceed that target for the year.”
Ford said it remains on track to break even or post a profit on a pre-tax basis in 2011.
While General Motors Corp. and Chrysler LLC have accepted $17.4 billion in federal aid and are racing toward deadlines to make deep cuts or file for bankruptcy, Ford was the first U.S. automaker to modify its contract with the United Auto Workers union and strike a deal to make up to 50 percent of payments to a union-run health care trust in stock instead of cash. The company also completed tender offers to reduce its debt by more than one-third.
The company said the moves would result in annual savings of $1 billion.
Ford drew the last $10.1 billion from its revolving line of credit during the quarter and said it had $21.3 billion in cash as of March 31. That’s down from $28.7 billion in the same period last year.
Ford’s first-quarter loss compares with a $70 million profit a year earlier. On a per share basis, Ford lost 60 cents, compared with earnings of 3 cents a share for the comparable quarter a year ago.
Revenue was $24.8 billion, down nearly 37 percent from $39.2 billion in the same quarter of last year, as Ford’s U.S. sales declined 43 percent.
On a pretax basis excluding special items such as a gain from its March debt exchange, Ford lost 75 cents a share, beating analysts estimates. Eleven analysts polled Thomson Reuters expected a $1.23 per share loss on revenue of $22 billion.
Booth called the first-quarter performance “solid” compared with Ford’s fourth-quarter loss of $5.9 billion, which led to a $14.6 billion loss for 2008, the worst annual loss in the company’s 106-year history.
“I think the important comparison for us is, ’are we improving versus the fourth quarter?’ Because the fourth quarter, things were really dreadful,” Booth said.
He said cost cuts and better pricing for its vehicles helped the company narrowed its losses, and he expects continued improvement for the remainder of the year.
One day after GM said it would temporarily close 13 North American plants for up to 11 weeks this summer to slash production, Ford said it has increased its second-quarter production forecast to 902,000 units, up 19.5 percent from the first quarter. North American production is expected to rise 25 percent to 435,000 vehicles.
The increase is due to seasonal adjustments and because of first-quarter production cuts to reduce dealer inventory. Ford shut down 10 North American assembly plants for an extra week in January to deal with the auto sales slump.
“We believe, with the decisive actions we have taken over the last few quarters, we have the dealer stocks well in line and with what we see with the reception of the new products,” Mulally said. “We believe we can go up a little bit more to support the real demand.”
Should GM or Chrysler, or even a key supplier file for bankruptcy, Ford’s production is likely to be affected. Ford is working with suppliers that would be affected by a filing, and Mulally said the company has met with the government’s auto task force to help it “understand the importance” and “interdependencies” of the supply base.
“The health of the supply base is probably the most critical issue as the government helps GM and Chrysler restructure,” he said. “I think they will continue to pay the highest priority as they restructure to the supply base to make sure it stays intact for all of us.”
Special items improved Ford’s earnings by $362 million. The company’s $1.1 billion gain on its debt exchange was offset by a $664 million impairment charge due to a reduction in the book value of its Swedish Volvo unit. Ford classified Volvo as “held for sale,” meaning that it’s likely the unit will be sold in the next 12 months.