Ford Loss Narrows; To Offer Buyouts

Ford Motor posted a sharply narrower fourth-quarter loss on Thursday after cutting costs and boosting profits from vehicle sales, but it forecast a net loss for the full year 2008.

Gene J. Puskar

The nation's No. 3 automaker, which has struggled with declining sales and sliding market share in the United States, said it would take further cost-cutting actions on its home turf, including offering buyouts to all of its unionized workers.

Ford was surpassed by Japanese rival Toyota Motor as the second-largest automaker in the United States last year as it grappled with a slowing economy, a slumping housing market and tighter credit markets that pinched less credit-worthy borrowers.

Ford reported a fourth-quarter net loss of $2.75 billion, or $1.30 per share, compared with a loss of $5.63 billion, or $2.98 per share, a year earlier.

The loss from continuing operations, excluding one-time items, was 20 cents a share. On that basis, analysts expected a loss of 19 cents a share, according to Reuters Estimates.

Ford shares were down 10 cents to $6.17 in morning trade on the New York Stock Exchange.

"With macro uncertainty dominating, we expect little about (the fourth quarter) to change investor views on either the near-term prospects or the longer-term turnaround," Lehman Brothers analyst Brian Johnson said in a research note.

U.S. auto sales fell for the second consecutive year in 2007, and the consensus view among Wall Street analysts and high-profile investors points to a further decline this year.

"Concerns about a weaker U.S. economy are well-founded, but we believe that Ford is relatively well-positioned to weather a slowdown," Calyon Securities analyst Mark Warnsman said.

"A prolonged, outright recession would be significantly more challenging," he added.

Ford's fourth-quarter revenue came in at $44.1 billion, up from $40.3 billion a year earlier.

"Although our automotive operations are improving on a year-over-year basis, the U.S. economy is slowing and the outlook for the auto industry remains challenging," Ford Chief Executive Alan Mulally said in a statement.

The fourth-quarter results included a series of one-time items, including a $2.4 billion pretax write-down of assets for the company's Sweden-based Volvo car unit.

The results also included a $1.37 billion pretax cost related to accounting for incentives to dealers. The move reduced Ford's quarterly revenue. Without the change, revenue would have been $45.5 billion.

Labor Costs Cuts

Ford had been expected to announce buyouts as part of a labor contract reached late last year, but the automaker had not provided any details until Thursday.

Analysts have hailed the contract for its potential to slash the company's labor costs by allowing it to hire new workers at half the wage rate of current employees. The pact also shifts retiree health-care obligations to a new trust fund.

Mulally said on a conference call with analysts and reporters that Ford was offering buyouts to all 54,000 of its employees represented by the United Auto Workers union. He said the buyouts would be offered in two stages -- one that runs from now through the end of February, and another that starts on Feb. 18 and runs through March 17.

He said most workers who accept buyouts would leave the company in the second quarter. He gave no details on how many workers Ford aims to trim through the buyouts.

Ford cut its work force by 32,800 employees in 2007 in an effort to bring production in line with demand in the crucial North American market.

Ford posted a pre-tax loss of $1.6 billion in that market in the fourth quarter, compared with a loss of $2.7 billion a year earlier. The improvement reflected higher margins on vehicles as the automaker pulled away from cut-rate sales to car rental companies and held back from offering large consumer incentives.

Ford's global automotive unit reported a pre-tax loss of $889 million for the quarter. For the full year 2007, Ford's North American auto unit reported a pre-tax loss of $3.5 billion.

Ford forecast a loss in its automotive unit for the full year 2008 but said it still expects to be profitable in North America and in its auto operations in 2009.

Ford's finance arm, Ford Motor Credit, said net income dropped 33 percent to $186 million in the fourth quarter. The unit reported net income of $775 million for 2007 and said it expects about the same results in 2008.

"Guidance for this unit called for flat 2008 profits, suggesting management expects higher credit costs to likely be offset by cost savings," JP Morgan analyst Himanshu Patel said.