Ford posts US$1.2b loss

DETROIT - Ford has reported its biggest quarterly loss in over four years as it took US$2.5 billion ($4 billion) in charges for job cuts and plant closings at the start of a massive restructuring effort.

Excluding the anticipated charges, Ford's results fell short of Wall Street expectations, underscoring concerns about the weakness of its auto operations and sending its shares down as much as 6 per cent.

Vehicle sales dropped by 6 per cent, reflecting steeper incentive spending, fewer sales of profitable sport utility vehicles and a greater reliance on low-margin sales to commercial fleets and car rental companies.

Ford, which is closing 14 plants and cutting up to 30,000 factory jobs in North America, posted a first-quarter net loss of US$1.19 billion, or 64 cents per share, compared with a profit of US$1.21 billion, or 60 cents per share, a year ago.

The loss was Ford's largest since a US$5 billion loss in the fourth quarter of 2001, reflecting charges for an earlier restructuring that coincided with the start of Chief Executive Bill Ford Jr's tenure at the helm of the company his great grandfather founded.

Analysts said the results spotlighted intensifying pressure on Ford.

"They continue to lose market share," said Tim Ghriskey, chief investment officer, Solaris Asset Management. "Incentives didn't seem to really help the situation here. You have to wonder if the incentives are really the right way to go." Bear Stearns analyst Peter Nesvold said Ford's sales appeared weaker even than cross-town rival General Motors Corp., which is undertaking its own sweeping restructuring.

Unlike GM, which has introduced a new line of full-size SUVs, Ford has come to rely more heavily on less-profitable passenger cars and crossover utility vehicles, he said. Unlike traditional truck-based SUVs, crossovers are built off car platforms and tend to be more fuel efficient.

Ford also expects to cut second-quarter vehicle production in North America 1.7 per cent from a year earlier, to 890,000 cars and trucks.

"Our thesis since last October has been that GM's mix would improve in 2006 as the year progressed and that Ford's would deteriorate," Nesvold wrote in a note. "Our sense is that our thesis is starting to play out."

Ford's earnings from continuing operations were 24 cents per share, short of Wall Street's view of 26 cents a share as tracked by Reuters Estimates. Revenue fell 9 per cent to US$41.1 billion from US$45.1 billion a year earlier.

One-time charges reduced earnings by 88 cents per share in the first quarter, or US$1.65 billion on an after-tax basis.

"We think first quarter results also begin to lower investor expectations about Ford's earnings power for the year," Goldman Sachs analyst Robert Barry said.

The results were Ford's first since the automaker announced its restructuring plan, dubbed the "Way Forward." The plan is designed to restore profitability in core North American automotive operations by 2008.

On a conference call with analysts, Ford executives declined to say when the plan would start to show results in operating income. The company no longer provides financial guidance.

"Our path is not going to linear and smooth," said Mark Fields, Ford's president for the Americas.

Ford's deepening troubles have sent its shares down about 15 per cent over the last 12 months. The company now has a US$14.2 billion market value, less than a tenth of the capitalisation of Japanese rival Toyota Motor Corp. Ltd.

Ford shares dropped 6.16 per cent, or 49 cents, to US$7.46 in noon trading on Friday local time. Ford's 7.45 per cent coupon bonds due in 2031 rose to 73.75, up from 73.25 on Thursday for a yield of 10.4 per cent, according to MarketAxess.

- REUTERS