DETROIT -- Ford Motor Co. surprised Wall Street today with a first quarter earnings report full of black ink -- saying it posted net income of $100 million on total revenue of $43.5 billion. That's compared with a net loss of $282 million on revenue of $43.0 billion during the same period a year ago. Ford stock skyrocketed on the news -- closing the day up 88 cents, or 11.7 percent, to $8.40 a share.
"Our plan is working, and we continue to show significant progress," Ford CEO Alan Mulally told journalists in a morning conference call. In North America, the company said it posted a pre-tax loss of $45 million compared with a loss of $613 million a year ago.
"We reduced our costs by $1.7 billion, with $1.2 billion of that coming from North America," Mulally said. Those reductions will keep Ford on track to achieve its goal of trimming costs in North America by $5 billion by the end of 2008, compared with 2005, Mulally said.
Ford's total revenue in North America in the quarter was $17.1 billion, down from $18.5 billion a year ago. Mulally said 4,200 UAW hourly employees agreed to take the company's latest North American buyout program. That is significantly less than the company's reported goal of about 8,000 reductions. Mulally said involuntary reductions are possible, "but right now our plan is to not do that." He declined to speculate whether salaried reductions are possible.
"The plan is we'll size ourselves accordingly," Mulally said. He noted that the company has recently used attrition to manage salaried reductions, "which is good for everybody." Ford will again offer buyouts to hourly workers at specific plants, but it won't do another companywide offering, Mulally said. Ford will not sweeten the buyout packages from those offered earlier this year, he said. "We feel very good about these offers," he said.
Buyouts are likely to be offered to workers at plants facing production slowdowns or shift idlings. More capacity reductions of that nature are coming at plants where demand for its products have waned, Mulally said.
Overseas results look strong
In Europe, Ford said it posted a pre-tax profit of $739 million on revenue of $10.2 billion. That's up from pre-tax profits of $219 million on revenue of $8.6 billion during the same period last year. The results do not include Jaguar and Land Rover, which Ford has agreed to sell to India's Tata Motors Ltd. In South America, Ford said its operations there posted a pre-tax profit of $257 million, up from $113 million a year ago. First quarter revenue increased to $1.8 billion, up from $1.3 billion a year ago.
"The results of this quarter are encouraging, particularly our outstanding performance in Europe and South America," Mulally said in the company statement. "In the past several years, we have substantially restructured these businesses. We believe this is an indication that our efforts to leverage Ford's global assets across the world will bear fruit. Going forward, we remain committed to our key business objectives, including our goal of reaching North America and overall Automotive profitability in 2009 despite the challenging economic conditions."
Ford also broke out its Volvo unit results in the report -- and they weren't good. Volvo posted a pre-tax loss of $151 million, compared with a profit of $94 million a year ago. Ford said Volvo was hurt by lower sales and changes in currency exchange rates, partially offset by cost reductions. Volvo's first quarter revenue was $4.2 billion, compared with $4.6 billion a year ago, Ford said.
Turnaround is on schedule
Ford expects the rest of 2008 to be challenging, cutting its full-year North American outlook for sales, but said it remains committed to its goal of returning North America and its whole auto business to profitability in 2009.
Ford, which posted losses of $2.7 billion in 2007 and $12.6 billion in 2006, has been cutting production capacity to match declining market share and meet the shift in demand for smaller more fuel-efficient vehicles.
The slowing U.S. economy and rising gasoline prices have pressured U.S. auto sales in 2008. With truck-heavy vehicle lineups, Ford, General Motors and Chrysler LLC are feeling the pinch, while Toyota Motor Corp., Honda Motor Co. and others gain from strong lineups of smaller, fuel-efficient cars.
Ford cut its North American production outlook for the second quarter by 20,000 vehicles to 710,000, or about 101,000 lower than a year earlier. It has also said that it remains ready to cut production more if demand falls further. Ford also cut its full year forecast for U.S. auto industry sales that includes medium and heavy trucks to a range of 15.3 million to 15.6 million, from a prior expectation for 16 million, a move executives tipped during a monthly sales conference call in early April.
Given that sales ran at about a 15.6 million seasonally adjusted annual rate in the first quarter, Ford is not banking on a significant sales rebound the rest of 2008. Medium and heavy duty trucks account for about 300,000 in annual sales. That would make Ford's outlook roughly 15 million to 15.3 million for light vehicle sales in line with recent expectations from analysts and other automakers.
More cuts in forecasts
J.D. Power and Associates has cut its 2008 U.S. light vehicle sales forecast to 14.95 million vehicles, which would be the lowest since 1994. JP Morgan & Co. cut its 2008 U.S. forecast to 15.2 million vehicles, from 15.5 million, and said Wednesday that U.S. auto industry sales ran at about a 15 million vehicle rate in April, down from the 15.1 million to 15.3 million rate in the first three months of the year.
Ford also said its Ford Motor Credit Co. reported net income of $24 million in the first quarter, down from $193 million a year earlier, mainly reflecting a higher provision for credit losses, depreciation on leased vehicles and higher net losses related to market valuation adjustments from derivatives.
Automotive News | April 24, 2008 - 7:13 am EST Written by Philip Nussel and Amy Wilson and Reuters contributed to this report.
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