WARNING-LONG: Ford Posts Loss of $5.8 Billion, Worst Since ’92

October 24, 2006
Ford Posts Loss of $5.8 Billion, Worst Since ’92
By MICHELINE MAYNARD

DEARBORN, Mich., Oct. 23 — The Ford Motor Company reported its worst
financial results in more than 14 years Monday and warned that its
business was likely to worsen further in the months ahead, as it and
other Detroit auto companies struggle to reinvent themselves.

Indeed, the new chief executive at Ford, Alan R. Mulally, a former
Boeing executive, said the automaker would require a full transformation
in the way it thought about consumers and approached the American market.

The typical Detroit turnaround, based on plant closings and introducing
a few hit vehicles but with little change in attitude, will not be
enough to see Ford through, Mr. Mulally said in an interview at Ford’s
headquarters here on Monday.

The company, posting a $5.8 billion loss for the third quarter, has to
first acknowledge the grim realities of the marketplace and then realign
itself to be more productive and nimble.

“The most important thing to watch,” Mr. Mulally said, “is do the
leaders have a view that’s different than the way it’s being done today.
Because if they don’t, we are surely not going to get there.”

But there will not be much good news anytime soon for Ford or for the
Chrysler Group, which is expected to join Ford on Wednesday in reporting
dismal results for the last three months.

Only General Motors, which is slowly bouncing back from one of the worst
stretches in its history with savings from deep cost cuts, is expected
by Wall Street to earn a profit in the third quarter, of about $300
million, though its American operations may well remain in the red.

The dire straits in Detroit represent the continuing fallout from the
auto companies’ too-long reliance on gasoline-consuming sport utility
vehicles, as well as their failure to develop new cars and trucks to
fend off their Asian competitors, particularly Toyota and Honda of Japan
and Hyundai of South Korea.

Those foreign companies have built factories in the United States during
the last two decades and focused on fuel-efficient vehicles, even as
they added S.U.V.’s and pickup trucks to compete in Detroit’s last
stronghold. That two-part approach paid off in record sales for the
Asian makers this summer, when gasoline prices soared above $3 a gallon
on average nationwide.

The rapid shift in the preferences of American consumers has been
especially hard on Ford and Chrysler, which have been slow to wean
themselves away from big vehicles and the outsize profits that such
vehicles typically produce.

Including the loss reported Monday — Ford’s worst showing since early
1992 — the company could be on track to lose more than the $10.6 billion
that G.M. did last year, even though G.M. is one-third bigger. Ford’s
recent losses were deeper than it, and many on Wall Street, had expected.

Ford executives said the company’s operating performance in the final
three months of the year would be even worse than its results in the
quarter recently ended. And it indicated that it expected its problems
to continue through at least the first half of 2007.

At Chrysler, meanwhile, executives are warning Wall Street that it will
lose at least $1.5 billion for the last three months when it reports on
Wednesday. That is twice as much as Chrysler previously cautioned
analysts to expect.

And in another unexpected disclosure, Chrysler acknowledged Monday that
it had nearly 100,000 more unsold vehicles on hand this summer than it
previously disclosed, at a time when its backlog soared well above
industry norms. [Page C6].

The worsening conditions at Ford and Chrysler have, by contrast, made
G.M. appear healthier. It began a plan nearly a year ago to cut 30,000
jobs and close all or parts of a dozen plants by 2008.

G.M. has curbed its North American losses, gaining a valuable head start
on Ford, said John Casesa, a longtime auto industry analyst.

“This is where G.M. was a year ago,” Mr. Casesa said of Ford. Like G.M.,
“Ford can do two things: borrow more money and sell assets” to buy time
until their operations problems are fixed.

Ford already has put a British maker of luxury cars, Aston Martin, up
for sale and is believed to be seeking buyers for its other British
marques, Land Rover and Jaguar. It has begun a restructuring plan,
called the Way Forward, which includes more than 40,000 job cuts and a
dozen or more plant closings through 2008.

As a sign of its need for fresh thinking, Ford reached outside the auto
industry for a new chief executive, Mr. Mulally, who succeeded William
Clay Ford Jr. in the post last month. Mr. Ford continues as chairman.

Mr. Mulally said the company’s restructuring plan, devised before he
arrived, would continue.

But he is also mounting efforts of his own to make Ford more productive
and eventually profitable, following similar steps he took at Boeing.
During his time there, Mr. Mulally streamlined production and helped the
company remain profitable even when airlines reduced orders after the
September 2001 attacks.

At the same time, he must convince Ford employees, shaken by job cuts
and the threat to long-cherished benefits like health care, that the
company has a vibrant future. Ford, once among the most respected names
in corporate America, has been rattled in recent years by a series of
high- and midlevel departures, producing a brain drain.

“Even more than turnaround, I would use the word transformation,” Mr.
Mulally said. “It will require a transformation of the product line and
a transformation of the business. You can’t do one without the other.”

For now, Mr. Mulally is still in a sort of honeymoon period, which,
analysts said, may last longer than that of the typical auto company
executive, given his newcomer status. After just two weeks on the job,
he sent Ford employees an e-mail message telling them that he had three
priorities: people, products and productivity.

“I know that the people of Ford have been through some tough times in
the past few years,” he wrote. “I wasn’t here to share that with you,
but I am here now to help move us forward,” adding that it is “at once
the most humbling and exciting prospect of my professional life.”

This year, Toyota, which had lagged behind the three Detroit companies
in American sales, has passed DaimlerChrysler, which includes its
Mercedes and Chrysler Group divisions, to rank by sales as the No. 3
auto company in the United States.

Given the slide at Ford, Toyota is likely to pass it, too, in the next
few years. Ford executives have already acknowledged that their company
is likely to hold only 14 percent to 15 percent of the American market
once its transformation is complete, or about 10 percentage points less
than at the beginning of the decade.

In fact, Ford’s market share declined to 15.5 percent in the third
quarter, a drop of two percentage points from the corresponding period
in 2005, and a central reason for its significant loss, which included
more than $3 billion in special charges related to the Way Forward plan.

That in itself did not shake Wall Street, but investors were surprised
when Ford’s chief financial officer, Donat R. Leclair, said in a
conference call with analysts that the company expected fourth-quarter
performance to be worse than that in the third quarter.

In trading Monday, Ford shares fell 11 cents, to $7.90.

Yet these heavy losses. and the prospect of more, come as the company is
seeking to enter the market with a new group of small, more
fuel-efficient vehicles.

These include a new crossover vehicle, the Edge, which Ford introduced
last week, and it is promising to eventually introduce a subcompact to
compete with models sold by G.M., Toyota, Honda and Nissan.
Unfortunately for Ford, the smaller vehicles come with an expectation of
smaller profits.

In revising its Way Forward plan last month, Ford said it did not expect
to earn money in North America until 2009, a year later than it
originally predicted. Mr. Leclair said in an interview Monday that Ford
anticipated a profit of 3 percent to 5 percent once it emerged from the red.

But getting there will be difficult. Mr. Mulally said Mr. Ford had been
“really clear” during its courtship of him that grim days lay ahead. But
he said he was not deterred.

“The Ford company is looking at business reality and dealing with it,”
Mr. Mulally said.

Ford’s third-quarter loss, equivalent to $3.08 a share, is more than 20
times that a year earlier, when it lost $284 million, or 15 cents a share.

“Let me make it clear — these results are unacceptable,” Mr. Mulally
said in the conference call, his first, with analysts and journalists.

Ford also disclosed that it would restate its financial results because
of incorrect accounting of derivatives linked to interest rate by its
finance arm, Ford Motor Credit.

The company said it was still studying most of the period affected, from
2001 through the third quarter of 2006, but that earnings from 2002
“will improve materially.”

Through the first nine months of the year, Ford has lost $7.24 billion,
with more than 80 percent of that coming from June to September. By
contrast, it earned $1.8 billion in the comparable nine months of 2005.

In the third quarter, Ford’s automotive operations lost $1.2 billion, or
62 cents a share, roughly what analysts had expected.

To reduce its work force, Ford is offering buyouts and other incentives
valued as high as $140,000 each to all 75,000 hourly workers in the
United States. Those workers have until Nov. 27 to decide whether to
take one of eight severance packages, while white-collar workers who are
offered buyouts are expected to leave by spring.

Shelly Lombard, a senior high-yield bond analyst with the research firm
Gimme Credit in New York, said, “We don’t expect to see any improvement
until the second half of next year, when most of the employees who take
the buyout will have exited.”

Mr. Casesa said Monday that Mr. Mulally’s presence was a rare bright
spot for Ford.

“You’ve got a new C.E.O. with a fresh pair of eyes on Ford’s problems,”
he said. “Increasingly, the market will look to this new C.E.O. for some
creative ideas to reinvigorate the revenue line.”

For his part, Mr. Mulally said he took the job “because I think we can
do this.”

“This is an important industry” and Ford has so much opportunity for
improvement, he added.

Asked whether he felt pressure from the expectations being placed on his
performance, Mr. Mulally replied, “There’s no reason why we can’t do
this, so it’s no pressure.”

Nick Bunkley contributed reporting from Detroit.

Copyright 2006 The New York Times Company

http://www.nytimes.com/2006/10/24/bu...dt&oref=slogin

Sparky Spartacus wrote:
<snip sob story>

i don't care. frod deserve to get it up the ass, and more. they
calculatingly sold vehicles they knew to be dangerously unstable - and
not only did they know them to be unstable, they also declined to spend
the money ensuring the roof would not collapse when the vehicle rolled.
have you ever seen the medevac helicopter fly away empty after the
fire crews cut a rolled exploder shell open? i have.

personally, i see no difference between frod's cavalier attitude to
safety and enron's cavalier attitude to finance. except that the
victims of enron, large financial institutions, had the ability to
ensure justice was done. if there is to be no criminal justice for
frod, bring on the economic justice.

ford, gm, chrysler-they just don't get it...
"Sparky Spartacus" > wrote in message
...
October 24, 2006
Ford Posts Loss of $5.8 Billion, Worst Since ’92
By MICHELINE MAYNARD

DEARBORN, Mich., Oct. 23 — The Ford Motor Company reported its worst
financial results in more than 14 years Monday and warned that its
business was likely to worsen further in the months ahead, as it and
other Detroit auto companies struggle to reinvent themselves.

Indeed, the new chief executive at Ford, Alan R. Mulally, a former
Boeing executive, said the automaker would require a full transformation
in the way it thought about consumers and approached the American market.

The typical Detroit turnaround, based on plant closings and introducing
a few hit vehicles but with little change in attitude, will not be
enough to see Ford through, Mr. Mulally said in an interview at Ford’s
headquarters here on Monday.

The company, posting a $5.8 billion loss for the third quarter, has to
first acknowledge the grim realities of the marketplace and then realign
itself to be more productive and nimble.

“The most important thing to watch,” Mr. Mulally said, “is do the
leaders have a view that’s different than the way it’s being done today.
Because if they don’t, we are surely not going to get there.”

But there will not be much good news anytime soon for Ford or for the
Chrysler Group, which is expected to join Ford on Wednesday in reporting
dismal results for the last three months.

Only General Motors, which is slowly bouncing back from one of the worst
stretches in its history with savings from deep cost cuts, is expected
by Wall Street to earn a profit in the third quarter, of about $300
million, though its American operations may well remain in the red.

The dire straits in Detroit represent the continuing fallout from the
auto companies’ too-long reliance on gasoline-consuming sport utility
vehicles, as well as their failure to develop new cars and trucks to
fend off their Asian competitors, particularly Toyota and Honda of Japan
and Hyundai of South Korea.

Those foreign companies have built factories in the United States during
the last two decades and focused on fuel-efficient vehicles, even as
they added S.U.V.’s and pickup trucks to compete in Detroit’s last
stronghold. That two-part approach paid off in record sales for the
Asian makers this summer, when gasoline prices soared above $3 a gallon
on average nationwide.

The rapid shift in the preferences of American consumers has been
especially hard on Ford and Chrysler, which have been slow to wean
themselves away from big vehicles and the outsize profits that such
vehicles typically produce.

Including the loss reported Monday — Ford’s worst showing since early
1992 — the company could be on track to lose more than the $10.6 billion
that G.M. did last year, even though G.M. is one-third bigger. Ford’s
recent losses were deeper than it, and many on Wall Street, had expected.

Ford executives said the company’s operating performance in the final
three months of the year would be even worse than its results in the
quarter recently ended. And it indicated that it expected its problems
to continue through at least the first half of 2007.

At Chrysler, meanwhile, executives are warning Wall Street that it will
lose at least $1.5 billion for the last three months when it reports on
Wednesday. That is twice as much as Chrysler previously cautioned
analysts to expect.

And in another unexpected disclosure, Chrysler acknowledged Monday that
it had nearly 100,000 more unsold vehicles on hand this summer than it
previously disclosed, at a time when its backlog soared well above
industry norms. [Page C6].

The worsening conditions at Ford and Chrysler have, by contrast, made
G.M. appear healthier. It began a plan nearly a year ago to cut 30,000
jobs and close all or parts of a dozen plants by 2008.

G.M. has curbed its North American losses, gaining a valuable head start
on Ford, said John Casesa, a longtime auto industry analyst.

“This is where G.M. was a year ago,” Mr. Casesa said of Ford. Like G.M.,
“Ford can do two things: borrow more money and sell assets” to buy time
until their operations problems are fixed.

Ford already has put a British maker of luxury cars, Aston Martin, up
for sale and is believed to be seeking buyers for its other British
marques, Land Rover and Jaguar. It has begun a restructuring plan,
called the Way Forward, which includes more than 40,000 job cuts and a
dozen or more plant closings through 2008.

As a sign of its need for fresh thinking, Ford reached outside the auto
industry for a new chief executive, Mr. Mulally, who succeeded William
Clay Ford Jr. in the post last month. Mr. Ford continues as chairman.

Mr. Mulally said the company’s restructuring plan, devised before he
arrived, would continue.

But he is also mounting efforts of his own to make Ford more productive
and eventually profitable, following similar steps he took at Boeing.
During his time there, Mr. Mulally streamlined production and helped the
company remain profitable even when airlines reduced orders after the
September 2001 attacks.

At the same time, he must convince Ford employees, shaken by job cuts
and the threat to long-cherished benefits like health care, that the
company has a vibrant future. Ford, once among the most respected names
in corporate America, has been rattled in recent years by a series of
high- and midlevel departures, producing a brain drain.

“Even more than turnaround, I would use the word transformation,” Mr.
Mulally said. “It will require a transformation of the product line and
a transformation of the business. You can’t do one without the other.”

For now, Mr. Mulally is still in a sort of honeymoon period, which,
analysts said, may last longer than that of the typical auto company
executive, given his newcomer status. After just two weeks on the job,
he sent Ford employees an e-mail message telling them that he had three
priorities: people, products and productivity.

“I know that the people of Ford have been through some tough times in
the past few years,” he wrote. “I wasn’t here to share that with you,
but I am here now to help move us forward,” adding that it is “at once
the most humbling and exciting prospect of my professional life.”

This year, Toyota, which had lagged behind the three Detroit companies
in American sales, has passed DaimlerChrysler, which includes its
Mercedes and Chrysler Group divisions, to rank by sales as the No. 3
auto company in the United States.

Given the slide at Ford, Toyota is likely to pass it, too, in the next
few years. Ford executives have already acknowledged that their company
is likely to hold only 14 percent to 15 percent of the American market
once its transformation is complete, or about 10 percentage points less
than at the beginning of the decade.

In fact, Ford’s market share declined to 15.5 percent in the third
quarter, a drop of two percentage points from the corresponding period
in 2005, and a central reason for its significant loss, which included
more than $3 billion in special charges related to the Way Forward plan.

That in itself did not shake Wall Street, but investors were surprised
when Ford’s chief financial officer, Donat R. Leclair, said in a
conference call with analysts that the company expected fourth-quarter
performance to be worse than that in the third quarter.

In trading Monday, Ford shares fell 11 cents, to $7.90.

Yet these heavy losses. and the prospect of more, come as the company is
seeking to enter the market with a new group of small, more
fuel-efficient vehicles.

These include a new crossover vehicle, the Edge, which Ford introduced
last week, and it is promising to eventually introduce a subcompact to
compete with models sold by G.M., Toyota, Honda and Nissan.
Unfortunately for Ford, the smaller vehicles come with an expectation of
smaller profits.

In revising its Way Forward plan last month, Ford said it did not expect
to earn money in North America until 2009, a year later than it
originally predicted. Mr. Leclair said in an interview Monday that Ford
anticipated a profit of 3 percent to 5 percent once it emerged from the red.

But getting there will be difficult. Mr. Mulally said Mr. Ford had been
“really clear” during its courtship of him that grim days lay ahead. But
he said he was not deterred.

“The Ford company is looking at business reality and dealing with it,”
Mr. Mulally said.

Ford’s third-quarter loss, equivalent to $3.08 a share, is more than 20
times that a year earlier, when it lost $284 million, or 15 cents a share.

“Let me make it clear — these results are unacceptable,” Mr. Mulally
said in the conference call, his first, with analysts and journalists.

Ford also disclosed that it would restate its financial results because
of incorrect accounting of derivatives linked to interest rate by its
finance arm, Ford Motor Credit.

The company said it was still studying most of the period affected, from
2001 through the third quarter of 2006, but that earnings from 2002
“will improve materially.”

Through the first nine months of the year, Ford has lost $7.24 billion,
with more than 80 percent of that coming from June to September. By
contrast, it earned $1.8 billion in the comparable nine months of 2005.

In the third quarter, Ford’s automotive operations lost $1.2 billion, or
62 cents a share, roughly what analysts had expected.

To reduce its work force, Ford is offering buyouts and other incentives
valued as high as $140,000 each to all 75,000 hourly workers in the
United States. Those workers have until Nov. 27 to decide whether to
take one of eight severance packages, while white-collar workers who are
offered buyouts are expected to leave by spring.

Shelly Lombard, a senior high-yield bond analyst with the research firm
Gimme Credit in New York, said, “We don’t expect to see any improvement
until the second half of next year, when most of the employees who take
the buyout will have exited.”

Mr. Casesa said Monday that Mr. Mulally’s presence was a rare bright
spot for Ford.

“You’ve got a new C.E.O. with a fresh pair of eyes on Ford’s problems,”
he said. “Increasingly, the market will look to this new C.E.O. for some
creative ideas to reinvigorate the revenue line.”

For his part, Mr. Mulally said he took the job “because I think we can
do this.”

“This is an important industry” and Ford has so much opportunity for
improvement, he added.

Asked whether he felt pressure from the expectations being placed on his
performance, Mr. Mulally replied, “There’s no reason why we can’t do
this, so it’s no pressure.”

Nick Bunkley contributed reporting from Detroit.

Copyright 2006 The New York Times Company

http://www.nytimes.com/2006/10/24/bu...dt&oref=slogin