Nov 7, 2008

Ford posts $2.7 billion operating loss, cuts production

DETROIT -- Ford Motor Co. posted a $2.7 billion operating loss in the third quarter and took further steps to cut costs in the wake of plummeting consumer confidence and tighter credit availability.
The net loss of $129 million was aided by a one-time benefit of $2 billion related to last year's UAW's retiree health-care accord. Ford had a loss of $380 million a year earlier. Today's results follow Ford's record $8.67 billion net loss in the second quarter, when the automaker abandoned its goal of returning to profit in 2009.

The company burned through $7.7 billion in cash during the quarter. It ended September with $18.9 billion in gross cash, down from $26.6 billion at the end of the second quarter. With available credit lines of $10.7 billion, the company said it has overall liquidity of $29.6 billion

Ford said it now expects the global auto downturn to be deeper, broader and longer than previously assumed. Industry volumes likely will shrink in 2009.
"We continue to take fast and decisive action implementing our plan and responding to the rapidly changing business environment," CEO Alan Mulally said in a prepared statement. "We have a strategy that is broad and specific enough to handle the dramatic changes in today's environment.''

Ford announced new restructuring actions including an additional 10 percent cut in North American salaried personnel costs. Ford had 22,600 of those workers at the end of September, but officials aren't saying how many jobs will be cut. Departures are expected by the end of January.

Ford also plans to reduce capital spending, manufacturing, information technology and advertising costs while trimming global inventories.

Ford also said it would continue to explore divestitures of non-core assets and utilize debt-for-equity swaps and other financing sources to strengthen its balance sheet.

Ford said it would cut its fourth-quarter North American production plan by 40,000 vehicles. The company now intends to build 430,000 vehicles during the final three months of 2008. The reductions are expected at car and crossover plants.

The results may bolster the case made by CEO Alan Mulally and other Detroit 3 leaders, who appealed for aid in Washington yesterday. Ford hasn't posted an annual profit since 2005. General Motors, which is expected by analysts to report a third-quarter loss later today, hasn't been profitable since 2004.

Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi "are seeking ways to help the auto industry given these unprecedented economic challenges," Mulally said in a statement.

The global credit crisis, plunging consumer confidence and erratic gasoline prices have contributed to a 15 percent decline in U.S. auto sales this year, including a 20 percent drop at Ford. October demand was the lowest in 25 years.

Aides who helped plan yesterday's meetings described a two-part request: An infusion of an unspecified amount of money from the Treasury or the Federal Reserve to get through the current economic crisis and $25 billion in new low-interest loans to fund retiree health-care benefits.

The requests would be on top of $25 billion in low-interest loans approved in September so automakers and suppliers can retool to build vehicles that are more fuel efficient.
Ford's automotive operations lost $2.9 billion before taxes during the quarter, compared with a pre-tax loss of $362 million a year earlier. The biggest loss came in North America, which posted a $2.6 billion pre-tax loss. That widened from a pre-tax loss of $1 billion a year ago.