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Ford loses $12.7 billion in 2006
This is plain ugly, I think you'll agree. F's book value is almost nil. According to the markets, the whole company is worth only $16 billion, or about 1/10th the value of Google. 2007 look worse than 2006 from an operating perspective.
I guess this just goes to show that nothing in this world is immune to the forces of change. One of the most venerable of American industrial companies is on the ropes.
From the Wall Street Journal...
I guess this just goes to show that nothing in this world is immune to the forces of change. One of the most venerable of American industrial companies is on the ropes.
From the Wall Street Journal...
Ford Posts Massive Loss
For Year Amid Sales Slump
Continued Weakness in North America
By JOHN D. STOLL and STEPHEN WISNEFSKI
January 25, 2007 10:35 a.m.
DETROIT -- Ford Motor Co. on Thursday gave Wall Street the latest glimpse of how deep its financial hole has become, announcing a fourth-quarter net loss of $5.8 billion that pushed the full-year shortfall to a record $12.7 billion.
The company also painted a bleak picture for 2007, noting that operating results will likely deteriorate further this year as the company continues losing market share in the U.S. and production is scaled back.
The fourth-quarter loss -- which was equivalent to $3.05 a share and compared with a loss of $74 million, or four cents a share a year earlier -- marked the auto maker's second consecutive quarterly loss in excess of $5 billion. Total sales and revenue in the fourth quarter fell to $40.3 billion from $46.3 billion a year earlier.
While the headline numbers are eye-popping, they were largely expected due to guidance Ford gave in October related to special charges and operating losses it anticipated for the fourth quarter. Ford's performance steadily deteriorated last year, as the company replaced General Motors Corp. as the poster child for the woes plaguing U.S. auto makers. GM lost $10.6 billion in 2005, but likely posted a significant improvement in 2006, while Ford isn't expecting profits for at least a few more years.
Industry experts say they are more concerned with the ongoing viability of Ford's restructuring plan, which includes more than 30,000 blue-collar job cuts in the U.S., several plant closures, an attempt to better coordinate Ford's sprawling and disjointed global operations, and an overhaul of its product portfolio. Ford has endured several restructuring attempts in recent years, and unsuccessfully tried to coordinate global operations in the 1990s.
In 2006, Ford's performance diminished as sales of high-profit trucks and SUVs fell, leading to production cuts that devastated automotive revenue levels. The auto maker's condition in North America was further hit by the billions of dollars in restructuring costs it incurred in the region in order to implement plant closures, job cuts and other downsizing measures.
"We began aggressive actions in 2006 to restructure our automotive business so we can operate profitably at lower volumes and with a product mix that better reflects consumer demand for smaller, more fuel efficient vehicles," Ford Chief Executive Alan Mulally said in a statement. "We fully recognize our business reality and are dealing with it"
The executive, who took the helm at Ford in October after a long career at Boeing Co., said: "We have a plan and we are on track to deliver."
Deeper Operating Losses Expected
Ford said it posted an after-tax loss from continuing operations, excluding special items, of $2.1 billion, or $1.10 a share, in the fourth quarter, compared with a profit of $285 million in the year-earlier period.
[Alan Mulally]
Ford shares were down five cents at $8.15 in pre-market trading as investors digested the fourth-quarter numbers and outlook from the second-largest U.S. auto producer. Analysts surveyed by Thomson First Call had, on average, estimated earnings of $1.01 a share.
The biggest drag on Ford's overall operations continued to be its North American automotive business, which lost $2.8 billion in the latest quarter, compared with a $217 million loss a year ago. Sales revenue in the region was $15.1 billion in the fourth quarter, versus $21.4 billion in the year-earlier period.
Ford said in the press release it expects its net loss to narrow in 2007 as special items -- which reduced last year's earnings by about $9.9 billion -- will come in significantly lower. But the company said it anticipates that its results excluding special items will be worse this year than in 2006.
Ford said it expects to post pre-tax profits in its South American and European automotive operations in 2007, just as it did in 2006. The company also expects its Premier Automotive Group business to tally a profit this year, after posting a $327 million loss last year.
But the company continues to expect a loss in its North American automotive operations. Ford, which last September accelerated the pace of its Way Forward turnaround plan for the region, has said it doesn't anticipate turning a profit in North America until 2009.
The company also expects that the performance of its Ford Motor Credit financing arm will deteriorate this year. In the fourth quarter, Ford Credit reported a net income of $279 million, down $26 million from a year ago, reflecting higher borrowing costs and higher depreciation expense, the company said. For the full year, Ford Credit earned $1.3 billion, versus $1.9 billion in 2005.
"While challenges lie ahead for us in 2007, we're focused on making continuous improvements to our plan, so we can capitalize on opportunities to create and sell more products and save more costs," Mr. Mulally said. "Our priorities, combined with our sense of urgency, will continue to transform Ford Motor Company."
Cash Outflows Continue
The fourth quarter was a monumental period for Ford on a variety of levels. Mr. Mulally took over on Oct. 1 and immediately went to work challenging executives to consolidate the company's global operations. Mr. Mulally oversaw the implementation of a major attrition program in the U.S. that resulted in 38,000 United Auto Worker members agreeing to accept buyouts or early retirement during the quarter. And he was influential in the company's move in the fourth quarter to secure $23.5 billion in additional financing via secured loans and lines of credit, and a massive convertible loan offering.
FORD'S OPERATING PROFIT
Division 4th Quarter 2006 2005
Ford N. America ($2.8 bil) ($6.1 bil) ($1.5 bil)
Ford S. America $114 mil $551 mil $399 mil
Ford Europe $232 mil $469 mil $73 mil
Asia/Pacific/Africa ($135 mil) ($185 mil) $61 mil
Premier Auto Group $191 mil ($327 mil) ($89 mil)
Ford Motor Credit $279 mil $1.3 bil $1.9 bil
Source: the company
Ford ended the year with total automotive cash, marketable securities, loaned securities and short-term Voluntary Employee Beneficiary Association, or VEBA, assets of $33.9 billion, up about $10 billion from the end of the third quarter.
"We're pleased the financial markets expressed confidence in our turnaround plan by providing us with the additional liquidity we need to fund our operations as we restructure to deliver sustainable profitability," Mr. Mulally said, noting that the capital will be deployed wisely.
In the fourth quarter, automotive operating-related cash flow was $1.8 billion negative, Ford said.
The company reiterated that it expects cumulative operating-related cash outflows will be about $10 billion from 2007 through 2009 and that restructuring charges will be $7 billion in the period. The company expects more than half of the $17 billion outflow to occur this year.
The outflows also reflect plans to invest in new products at levels comparable to those in previous years, or about $7 billion.
Write to John D. Stoll at john.stoll@dowjones.net7 and Stephen Wisnefski at stephen.wisnefski@dowjones.com8
For Year Amid Sales Slump
Continued Weakness in North America
By JOHN D. STOLL and STEPHEN WISNEFSKI
January 25, 2007 10:35 a.m.
DETROIT -- Ford Motor Co. on Thursday gave Wall Street the latest glimpse of how deep its financial hole has become, announcing a fourth-quarter net loss of $5.8 billion that pushed the full-year shortfall to a record $12.7 billion.
The company also painted a bleak picture for 2007, noting that operating results will likely deteriorate further this year as the company continues losing market share in the U.S. and production is scaled back.
The fourth-quarter loss -- which was equivalent to $3.05 a share and compared with a loss of $74 million, or four cents a share a year earlier -- marked the auto maker's second consecutive quarterly loss in excess of $5 billion. Total sales and revenue in the fourth quarter fell to $40.3 billion from $46.3 billion a year earlier.
While the headline numbers are eye-popping, they were largely expected due to guidance Ford gave in October related to special charges and operating losses it anticipated for the fourth quarter. Ford's performance steadily deteriorated last year, as the company replaced General Motors Corp. as the poster child for the woes plaguing U.S. auto makers. GM lost $10.6 billion in 2005, but likely posted a significant improvement in 2006, while Ford isn't expecting profits for at least a few more years.
Industry experts say they are more concerned with the ongoing viability of Ford's restructuring plan, which includes more than 30,000 blue-collar job cuts in the U.S., several plant closures, an attempt to better coordinate Ford's sprawling and disjointed global operations, and an overhaul of its product portfolio. Ford has endured several restructuring attempts in recent years, and unsuccessfully tried to coordinate global operations in the 1990s.
In 2006, Ford's performance diminished as sales of high-profit trucks and SUVs fell, leading to production cuts that devastated automotive revenue levels. The auto maker's condition in North America was further hit by the billions of dollars in restructuring costs it incurred in the region in order to implement plant closures, job cuts and other downsizing measures.
"We began aggressive actions in 2006 to restructure our automotive business so we can operate profitably at lower volumes and with a product mix that better reflects consumer demand for smaller, more fuel efficient vehicles," Ford Chief Executive Alan Mulally said in a statement. "We fully recognize our business reality and are dealing with it"
The executive, who took the helm at Ford in October after a long career at Boeing Co., said: "We have a plan and we are on track to deliver."
Deeper Operating Losses Expected
Ford said it posted an after-tax loss from continuing operations, excluding special items, of $2.1 billion, or $1.10 a share, in the fourth quarter, compared with a profit of $285 million in the year-earlier period.
[Alan Mulally]
Ford shares were down five cents at $8.15 in pre-market trading as investors digested the fourth-quarter numbers and outlook from the second-largest U.S. auto producer. Analysts surveyed by Thomson First Call had, on average, estimated earnings of $1.01 a share.
The biggest drag on Ford's overall operations continued to be its North American automotive business, which lost $2.8 billion in the latest quarter, compared with a $217 million loss a year ago. Sales revenue in the region was $15.1 billion in the fourth quarter, versus $21.4 billion in the year-earlier period.
Ford said in the press release it expects its net loss to narrow in 2007 as special items -- which reduced last year's earnings by about $9.9 billion -- will come in significantly lower. But the company said it anticipates that its results excluding special items will be worse this year than in 2006.
Ford said it expects to post pre-tax profits in its South American and European automotive operations in 2007, just as it did in 2006. The company also expects its Premier Automotive Group business to tally a profit this year, after posting a $327 million loss last year.
But the company continues to expect a loss in its North American automotive operations. Ford, which last September accelerated the pace of its Way Forward turnaround plan for the region, has said it doesn't anticipate turning a profit in North America until 2009.
The company also expects that the performance of its Ford Motor Credit financing arm will deteriorate this year. In the fourth quarter, Ford Credit reported a net income of $279 million, down $26 million from a year ago, reflecting higher borrowing costs and higher depreciation expense, the company said. For the full year, Ford Credit earned $1.3 billion, versus $1.9 billion in 2005.
"While challenges lie ahead for us in 2007, we're focused on making continuous improvements to our plan, so we can capitalize on opportunities to create and sell more products and save more costs," Mr. Mulally said. "Our priorities, combined with our sense of urgency, will continue to transform Ford Motor Company."
Cash Outflows Continue
The fourth quarter was a monumental period for Ford on a variety of levels. Mr. Mulally took over on Oct. 1 and immediately went to work challenging executives to consolidate the company's global operations. Mr. Mulally oversaw the implementation of a major attrition program in the U.S. that resulted in 38,000 United Auto Worker members agreeing to accept buyouts or early retirement during the quarter. And he was influential in the company's move in the fourth quarter to secure $23.5 billion in additional financing via secured loans and lines of credit, and a massive convertible loan offering.
FORD'S OPERATING PROFIT
Division 4th Quarter 2006 2005
Ford N. America ($2.8 bil) ($6.1 bil) ($1.5 bil)
Ford S. America $114 mil $551 mil $399 mil
Ford Europe $232 mil $469 mil $73 mil
Asia/Pacific/Africa ($135 mil) ($185 mil) $61 mil
Premier Auto Group $191 mil ($327 mil) ($89 mil)
Ford Motor Credit $279 mil $1.3 bil $1.9 bil
Source: the company
Ford ended the year with total automotive cash, marketable securities, loaned securities and short-term Voluntary Employee Beneficiary Association, or VEBA, assets of $33.9 billion, up about $10 billion from the end of the third quarter.
"We're pleased the financial markets expressed confidence in our turnaround plan by providing us with the additional liquidity we need to fund our operations as we restructure to deliver sustainable profitability," Mr. Mulally said, noting that the capital will be deployed wisely.
In the fourth quarter, automotive operating-related cash flow was $1.8 billion negative, Ford said.
The company reiterated that it expects cumulative operating-related cash outflows will be about $10 billion from 2007 through 2009 and that restructuring charges will be $7 billion in the period. The company expects more than half of the $17 billion outflow to occur this year.
The outflows also reflect plans to invest in new products at levels comparable to those in previous years, or about $7 billion.
Write to John D. Stoll at john.stoll@dowjones.net7 and Stephen Wisnefski at stephen.wisnefski@dowjones.com8
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