Ford swings to first-quarter loss as restructuring begins

Steve Harber, one of the managers of a Ford agency in the south Denver suburb of Centennial, Colorado, looks over the 2006 Ford GT on the showroom floor on Friday. The limited production vehicle is the only one that the dealership will get to sell during the current model run. Ford on Friday posted a US$1.2 billion loss in the first quarter. PHOTO: AP

Ford Motor Co swung to a US$1.2 billion loss in the first quarter as it began a costly restructuring effort amid weak US sales, leaving Ford executives disappointed but determined to go ahead with their plan to cut 30,000 jobs and remake the No. 2 automaker.

"This transformation isn't going to be quick and it isn't going to be painless," Ford chairman and chief executive Bill Ford said in a statement. "It involves risks and the financial rewards won't be immediate. But in the end, I believe we'll get there."

Investors were not so sure. In afternoon trading, Ford's stock fell US$0.58, or 7.3 percent, to US$7.37 on the New York Stock Exchange, approaching its 52-week low of US$7.13.

The loss of US$0.64 per share for the January-March period compares with a profit of US$1.2 billion, or US$0.60 per share, a year earlier. Sales fell 9 percent to US$41.1 billion from US$45.1 billion a year ago. It was Ford's worst quarterly performance since the fourth quarter of 2001, when the company posted a US$5.07 billion loss due to US$4.1 billion in costs for a previous restructuring plan.

The automaker's results were in stark contrast to its bigger crosstown rival, General Motors Corp, which reported record quarterly revenues and a smaller loss for the quarter on Thursday. GM lost US$323 million for the quarter versus a loss of US$1.3 billion the previous year. GM has begun its own North American restructuring after losing US$10.6 billion last year.

Analysts said the difference was Ford's weaker mix of vehicles. While GM was raking in profits from its new lineup of sport utility vehicles, Ford was heavily dependent on mid-size cars with lower margins, Goldman Sachs analyst Robert Barry said. Ford's SUV sales plummeted in the first quarter, with sales of the Ford Explorer down 21 percent. The company's overall US sales fell 3 percent for the January-March period.

Ford said it spent more on incentives and had a higher number of low-margin lease and fleet sales than the year before. The automaker also suffered losses at the 23 former Visteon Corp facilities it took over last fall as part of a deal to avert bankruptcy at the auto supplier, its former parts division.

Despite those headwinds, Ford in January launched its Way Forward restructuring plan, which calls for cutting 30,000 jobs and closing 14 facilities by 2012. Ford's first-quarter results included a pretax charge of US$1.7 billion, or US$0.61 per share, for costs associated with the plan, including buyouts and pay for laid-off hourly workers whose plants have been idled.

Excluding one-time items such as restructuring charges, Ford said it earned US$458 million, or US$0.24 per share.

That was US$0.01 a share below Wall Street's expectations, according to analysts surveyed by Thomson Financial.

Ford will start reaping the benefits of its restructuring efforts in future quarters. A deal with the United Auto Workers that makes retirees pay more for their health care is expected to take effect this summer, for example. But Ford Americas President Mark Fields would not be specific about when the company will see those gains or will resume providing financial guidance.

Ford's North American automotive unit, which has been struggling with declining sales and high fixed costs, reported a pretax loss of US$2.9 billion for the first quarter, down from a US$557 million profit the previous year. Excluding one-time items, the division lost US$457 million, compared with a US$644 million profit last year.

Worldwide, Ford's automotive operations lost US$2.7 billion versus a profit of US$473 million last year. Excluding one-time items, worldwide operations lost US$184 million in contrast to a US$580 million profit last year. Ford sold 1.7 million vehicles worldwide in the first quarter, up 3 percent from a year ago despite the decline in the US.

Ford Motor Credit earned US$479 million for the quarter, down 33 percent from US$710 million a year ago. The division said it faced higher borrowing costs due to Ford's credit rating, which fell below investment grade last year.