Ford Narrows Losses in 2007
January 24, 2008

By Michelle Krebs

Ford announced Thursday morning that it lost  $2.7 billion in 2007, but that loss  was significantly less than the record $12.6 billion lost in 2006. Yet, Ford is bracing for a tough 2008 by further cost-cutting.

"Each of our automotive operations is improving, and we are encouraged by the progress, which validates our strategy and plan," said Ford President and CEO Alan Mulally in a statement. Mulally and Ford CFO Don Leclair will host conference call briefings with the media and investment community later Thursday morning.

Despite year-over-year improvements, Mulally noted in the press statement, "The U.S. economy is slowing and the outlook for the auto industry remains challenging."

To that end, Mulally said Ford will cut costs further in North America. Word is the automaker is negotiating with the United Auto Workers union to eliminate another 10,000 plus jobs, details of which are expected soon.

"In addition (to cost cuts), we will continue to accelerate the flow of new products, reduce vehicle complexity, and adjust production to the changing business environment," Mulally said in the statement.

Ford increased revenues in 2007, to $173.9 billion from $160.1 billion. Ford said the higher revenues were due to exchange rates, better net pricing on its vehicles and an improved product mix of the vehicles it sold.

On the Right Track

Ford's improved financial picture was in line with expectations by analysts, who largely agree the automaker is on the right track.

Much of Ford's improvement came in the fourth-quarter of 2007 when the automaker reported a loss of $2.8 billion, substantially less than the $5.6 billion in the fourth-quarter a year ago. Its after-tax results from continuing operations was actually in the black at $429 million, compared to an after-tax loss of $2 billion in the year-ago quarter.

North American Drain

The drain continues to be North America. Ford said all automotive operations were profitable in 2007, except for those in North America.

For the year, Ford’s automotive operations showed a pre-tax loss of $1.1 billion, compared with $5.1 billion a year ago. In the fourth quarter, Ford’s pre-tax loss on automotive operations was $889 million, compared with $2.3 billion a year ago.

Worldwide revenue from automotive was $155.8 billion, compared with $143.3 billion a year ago. Fourth quarter $40.8 billion, up from $36. billion a year ago.

Total vehicles sold dipped for the year to 6,553,000, compared with 6,597,000 a year ago, but fourth-quarter vehicle sales rose to 1,643,000 from 1,568,000.

While North America continues to be a drain on Ford’s worldwide automotive operations, the financial picture is improving. Ford’s North American Automotive operations lost $3.5 billion in 2007 compared with $6.0 billion a year ago. North America was headed in the right direction in the fourth quarter when Ford lost $1.6 billion, down from $2.7 billion.

Non-North American Growth

Other regions showed marked improvement.

Ford's operations in South America showed a profit of $1.2 billion, up from $551 million in 2006. Ford of Europe had a $997 million profit, up from $455 million  a year ago with significantly higher revemues.

The being-dismantled Premier Automotive Group earned $504 million for Ford in 2007, compared with a loss of $344 million in 2006, largely through cost reductions, volume growth and higher net pricing at Land Rover.

Volvo lost money for the full year but broke even for the fourth quarter, Ford said. In 2008, Ford, which has chosen to keep Volvo for now, will detail Volvo’s financials for the first time. Meantime, Ford expects to close the purchase of Jaguar and Land Rover to India’s Tata Motors by the end of the first quarter.

The Asia Pacific-Africa region earned a profit of $40 million, compared with a pre-tax loss of $185 million in 2006, thanks largely to higher profits in China.

Mazda, of which Ford owns about third, earned $204 million for Ford, compared with $168 million in 2006.

Financial Operations Less Profitable in 2007

Ford’s financial operations were profitable in 2007, but not as much as they were in 2006. For the year, Ford earned $1.2 billion from its Financial Services sector, which includes Ford Motor Credit Corp., compared with $2 billion a year ago.

Posted by Michelle Krebs at 4:17 AM under Ford | Comments (0) | digg this | Seed Newsvine