Ford Earnings Miss; Says Liquidity is Adequate

Ford Motor posted a deeper-than-expected $5.9 billion quarterly loss on Thursday but said it would have the cash to survive the worst downturn in auto sales in decades without a U.S. government bailout.

Ford plans to cut some 2,500 white-collar jobs and draw down its remaining credit line after burning through $5.5 billion of cash as global auto sales plunged.

CNBC.com

For 2008, Ford posted a loss of $14.6 billion for 2008, its third consecutive annual loss.

For the year, Ford burned through $21 billion but said it expected that it would be be able to better conserve cash in 2009 if U.S. sales stabilize in the second half as it expects.

The No. 2 U.S. automaker also said it would draw down $10.1 billion remaining on its credit line and defer $2 billion in payments pledged to a trust fund aligned with the United Auto Workers union to bolster its cash position the current quarter.

"We took this action because of our growing concerns about the instability of the capital markets," Ford Chief Executive Alan Mulally told analysts in a conference call.

Shares in Ford were down about 2 percent in early trade.

Analysts credit Ford under Mulally with having the foresight to borrow heavily in 2006, before credit markets shut down and auto sales plunged in 2008.

"They're doing what they can to take costs out but the other side of the equation—sales—has got to recover," said Erich Merkle, an independent auto analyst.

Ford's captive credit arm, Ford Motor Credit, said it would cut 1,200 jobs, or 20 percent of its staff. For its auto operations, Ford said it had almost completed 1,300 white-collar job cuts that it began in November.

Video: Breaking Down the Ford Numbers

Ford said the UAW had also agreed to suspend its jobs bank, dropping a controversial program that had guaranteed nearly full wages and benefits for union workers after their jobs were eliminated. Ford had about 1,500 UAW workers in its jobs bank at the end of the year.

Suspending the UAW jobs bank had been a condition imposed by the federal government for the $17.4-billion bailout of Ford's rivals General Motors and Chrysler. Both GM and Chrysler had previously announced an end to the program.

Overall, Ford cut its North American auto workforce by 5,000 jobs in the fourth quarter to 75,200, most of that in its hourly workforce. The Ford Credit, and salaried job cuts will be reflected in 2009 results.

No Signs of Recovery

"I think it's by far the most volatile period we've ever seen," Chief Financial Officer Lewis Booth told reporters. "We're not seeing any signs of recovery yet."

Still, Booth said Ford was expecting some recovery in the U.S. market in the second half of the year and he expected it would be the first region to show signs of a rebound.

Ford's net loss widened to $5.88 billion, or $2.46 per share, in the quarter, from $3.06 billion. or $1.13 per share, a year earlier.

Excluding one-time items, the per-share loss was $1.37 compared with the $1.23 per analysts had expected.

Ford Motor Credit, traditionally a source of profit, slipped to a $372-million quarterly loss on credit-related charges, derivatives losses and lower loan volumes.

Volvo, a the Swedish luxury brand Ford is looking to sell, posted a forth-quarter loss of $736 million on a pre-tax basis, down from a break-even position a year earlier. Mulally said Ford's review of the Volvo brand would take some time.

Ford ended 2008 with $13.4 billion cash. It said it would receive the $10.1 billion from its line of credit on Feb. 3.

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Ford has asked for a $9 billion line of credit from the U.S. government as insurance against a worsening in the global economy. It also expects to receive $5 billion of direct loans from a U.S. program to support improved fuel economy.

Industry-wide U.S. auto sales fell 18 percent in 2008 and are expected to fall for a fourth consecutive year in 2009, ratcheting up pressure on automakers in the world's largest and most profitable market.

Ford remains more optimistic than most industry forecasts for 2009. Ford sees a range of U.S. sales from 11.5 million to 12.5 million units including medium and heavy trucks.

Merkle said he was encouraged that Ford gained share even as the market collapsed in the final months of 2008, evidence that it has a stronger position than GM or Chrysler.

If the economy avoids a further sharp downturn, Ford could escape the bailouts reshaping GM and Chrysler, he said.

"The first three or four months of this year are going to be a carry-over from the fourth quarter," Merkle said. "But ultimately sales will recover."

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