Ford posts record loss in '08

January 29, 2009 12:11:22 PM PST
Ford Motor Co. said Thursday it lost $5.9 billion in the fourth quarter and burned through $5.5 billion in cash, pushing the automaker to the worst annual loss in its 105-year history as sales slumped worldwide. The second-largest U.S. automaker lost $14.6 billion in 2008 but said it still would not seek federal loans. With a precarious year ahead, Ford announced plans to cut 1,200 jobs at its credit arm and borrow $10.1 billion from an existing line of credit in case the economy worsens.

Chief Executive Alan Mulally said on a conference call with reporters and industry analysts that the company plans further restructuring actions that will be announced at a later date.

Ford said it lost $2.46 per share in the three months ended Dec. 31, compared with a loss of $2.8 billion, or $1.13 per share, for the year-ago period.

Revenue fell to $29.2 billion, down 36 percent from $45.5 billion in the fourth quarter of 2007.

The results missed Wall Street's expectations. Excluding special items, the company reported a $1.37 per share loss for the quarter. On that basis, analysts polled by Thomson Reuters expected a fourth-quarter loss of $1.30 per share on revenue of $27.1 billion.

Ford shares fell 5 cents, or 2.5 percent, to $1.98 in afternoon trading.

Dearborn-based Ford announced that it has reached agreement with the United Auto Workers union to end the "jobs bank" in which laid-off workers get most of their pay, although the effective date is still being negotiated.

Chrysler LLC ended its jobs bank Monday, and General Motors Corp. has said its will end next week.

Ford also said it would not come to the aid of struggling parts supplier Visteon Corp., unlike GM, which has spent billions helping its former parts unit Delphi Corp. emerge from bankruptcy. Ford spun off Van Buren Township-based Visteon in 2000.

"I think Ford and Visteon are truly in different places," Mulally said. "They have really diversified their portfolio."

Ford said special items accounted for $1.4 billion of its fourth-quarter net loss, largely due to personnel reductions and investment losses on money set aside for a union-administered trust that will take over retiree health care costs in 2010. Ford has about $2 billion in investments in that account, which can be used to fund operations if needed.

The Treasury Department agreed last month to lend $13.4 billion to GM and $4 billion to Chrysler, saving Ford's U.S-based competitors from bankruptcy.

Company spokesman Mark Truby said Ford's position on seeking federal loans was unchanged. It asked for a $9 billion line of credit from the government but has said it has enough cash to make it through 2009 and doesn't intend to use government loans unless economic conditions worsen.

"We don't plan to or foresee using it," Truby said Thursday.

Ford's cash burn rate slowed from $7.7 billion in the third quarter. The company said it had $13.4 billion cash on hand as of Dec. 31 and plans to receive the $10.1 billion from its secured credit line Tuesday.

"We took this action because of our concerns about the growing instability of the capital markets," Mulally said of the borrowing.

Chief Financial Officer Lewis Booth said the company is tapping the credit line only to make sure it's available and not to fund its operations. Ford hasn't needed a government bailout because it borrowed funds and set up credit lines totaling $23.5 billion in 2006 and 2007 to prepare for a downturn.

"We are confident that our burn rate will be substantially slower in 2009," Booth told reporters Thursday morning.

He said Ford cut costs in its automotive sector by $1.4 billion in the fourth quarter compared with the same time in 2007, and $4.4 billion for the full year.

Ford's annual loss of $14.6 billion compares with a loss of $2.7 billion in 2007. Before 2008, the company had its worst year in 2006 when losses reached $12.6 billion.

Booth said Ford still is on track to break even in 2011, but the company anticipates worldwide sales to fall more than 10 percent in 2009. Ford sees improvement later this year, however, as government stimulus packages take effect.

"Things are so volatile," Booth said. "This is unprecedented."

Ford said it plans to invest $14 billion over seven years to produce fuel-efficient vehicles, allowing it to qualify for up to $5 billion in loans from the U.S. Energy Department by 2011.

Congress allocated $25 billion to the Energy Department for loans to automakers so they can develop new fuel-efficient technologies.

Vehicle sales in the U.S. are at their lowest levels in 26 years as consumers face tight credit markets and economic uncertainty. Ford's U.S. sales plunged 20.5 percent in 2008, and its market share fell slightly to 15 percent from 15.4 percent in 2007.

That uncertainty has spread to Europe as well, where sales have dropped. Markets such as South America, typically a bright spot for Ford, are also slowing.

The company posted a quarterly pretax profit of $79 million from its investment in Mazda Motor Co. In November, Ford sold a large portion of its 33.4 percent stake in the Japanese automaker.

Ford Motor Credit Co. reported a pretax loss of $372 million, compared with a profit of $263 million in the year-ago quarter. The financing arm said the job cuts it announced Thursday would cut 20 percent of its work force and were needed because of lower auto sales and the planned reduction in receivables from Mazda, Jaguar and Land Rover. Ford sold the latter two brands in March to Tata Motors Ltd. of India.

Ford is still considering a sale of its Volvo unit, which lost $736 million in the quarter.

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