Ford Motor Co plans to eliminate as many as 5,000 salaried jobs in North America and said profit won't meet estimates this year, pushing the shares down 7.5 percent.
Ford's actions suggest the industry will decline more after two years of record US vehicle sales. Automotive stocks fell as Standard & Poor's said it may lower credit ratings for Ford and General Motors Corp and analysts downgraded stocks of parts-makers including Lear Corp, a big Ford supplier.
"Everyone was hoping there was a recovery," said Prudential Securities analyst Michael Bruynesteyn, who rates Ford a "hold."
"There's been no pain yet -- the pain is still going to come."
Chief Executive Jacques Nasser is shaking up operations after Ford last month posted its first quarterly loss since 1992, stung by the US$2.1 billion cost to replace Firestone tires it deemed unsafe. A new chief for North America is trying to improve sagging vehicle quality and plant efficiency. Its US sales are down 11 percent this year and overseas-based rivals including Toyota Motor Corp are eroding its market share.
Ford plans a fourth-quarter charge of US$700 million, or 40 cents a share, for the job cuts, three-quarters of which will come through early retirements. It also plans a third-quarter charge of about US$200 million, or 10 cents, mostly from writing down investments in electronic commerce and automotive ventures.
Full-year 2001 earnings will be about US$0.70 a share before the charges, Ford said. That's less than the US$1.20 average analyst estimate in a Thomson Financial/First Call poll. The automaker blamed declining demand and higher sales incentives.
Dearborn, Michigan-based Ford fell US$1.77 to US$21.70 after earlier touching US$21.23, its lowest price in a year. General Motors declined US$3.10 to US$59.47, while Lear, the largest maker of car and truck interiors, fell US$5.09 to US$37.05.
Ford plans to cut 4,000 to 5,000 salaried workers, or 11 percent of the US office workers, by the end of the year. The company expects 75 percent of the workers will retire early and that the rest will take buyouts, spokesman Nick Sharkey said. Ford had 45,822 US salaried workers at the end of last year.
"Five thousand white-collar jobs? That's nothing," said analyst Bruynesteyn, who doesn't own any Ford shares and whose firm doesn't have banking business with the automaker.
"These guys are going to have to cut a lot more before they're done."
Today's actions are part of "a broader, more comprehensive restructuring of our North American operations" that may be announced by year-end, Chief Financial Officer Martin Inglis said on a conference call. "Nothing is off limits. We will make ourselves much more competitive." Ford's market share fell 1.6 percentage points to 23.2 percent so far this year, hurt in part by new truck models at General Motors and Toyota.
The job cuts may save as much as US$300 million a year, Inglis said. He declined to say whether Ford plans actions that would affect union-represented factory workers and said he has no reason to recommend a cut in the company's US$0.30 quarterly dividend.
Federal officials are investigating 203 highway deaths linked to Bridgestone/Firestone Inc tires, most mounted on Explorers, one of Ford's most profitable products. Ford and the tiremaker's owner, Bridgestone Corp, each say the other bears the main responsibility for the problem.
Two programs to satisfy customers upset about vehicle quality issues will hurt this year's earnings, CFO Inglis said. One involves a tentative settlement of lawsuits in five states concerning ignition systems, and the other involves extending the warranty on 3.8-liter engines, mostly in 1994 and 1995 Ford Windstar minivan.
The programs will be treated as operating expenses and lower earnings by less than the US$0.25 a share some analysts have estimated, Inglis said.
Ford is short of cash after a series of acquisitions, including Jaguar Cars and the auto operations of Volvo AB, analysts said. The company had US$16.2 billion in cash and marketable securities as of June 30, down from US$16.5 billion at the end of 2000 and US$25.6 billion prior to a corporate recapitalization program last year.
Ford has also purchased businesses not directly tied to auto production. This year it purchased Beanstalk Group, which licenses corporate names for use on retail products, bought a minority stake in Canadian software maker Executive Manufacturing Technologies Inc and acquired the 18.5 percent of car-rental company Hertz Corp it didn't already own.
"Ford has been diverted from the primary things they need to be looking at," said David Cole, director of the Center for Automotive Research in Ann Arbor, Michigan.
"They've spent a lot of money."
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