Ford Loses $1.4 Billion in First Quarter; Less Than Analysts' Predicted
By Michelle Krebs April 24, 2009By Michelle Krebs
DEARBORN, Mich. -- Ford Motor Co. reported Friday it had a net loss of $1.4 billion in the first quarter, a smaller loss than analysts had forecasted.
Ford's results lower the probability that Ford will need government loans as General Motors and Chrysler have required. Indeed, Ford reiterated in its press statement that it does not expect to seek a government loan.
"Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world," said Ford CEO Alan Mulally in a statement.
Still, Mulally said Ford "made strong progress" on its transformation plan by: gaining market with new products; slowing operating-related cash outflows; reducing outstanding debt; lowering structural costs; and reaching new agreements with the United Auto Workers union.
Ford's loss was about half what most analysts had forecasted. Analysts surveyed by Bloomberg News expected Ford to report a loss of $3.2 billion for its largest first-quarter loss in 17 years. Though lower than analysts estimated, Ford's first-quarter loss was its largest since 1992.
Ford said it is on track to meet or beat its financial targets based on current planning assumptions. The automaker still expects to have pre-tax results be at breakeven or better in 2011, excluding special items.
"Clearly, these continue to be challenging days for the global auto industry," Mulally said in his statement. "I remain encouraged by the progress Ford is making to allow us to operate through the downturn and emerge as a lean, globally integrated automaker poised for profitable growth when the economy rebounds."
Ford still faces major challenges, most notably continued reduction of its cash burn. It is no guarantee that Ford will not be forced to seek government loans. But Ford also may be well positioned to pick up sales and market share from its ailing domestic competitors.
Stock Rises
In early trading Friday morning, Ford's stock price continued to rise. The stock was trading at about $5.15 a share.
Ford's stock has more than doubled in the past seven weeks, benefiting from the fact that it is the only domestic automaker not seeking a government bailout nor considering bankruptcy.
In addition, Ford reached deals to cut labor costs by $500 million a year and reduced its debt by 38 percent during the quarter.
By the Numbers
Ford's $1.4-billion net loss for the first quarter compares with a net profit of $70 million in the first quarter of 2008. Its pre-tax operating loss, excluding special items, was approximately $2 billion, a decline from a profit of $686 million a year ago. On an after-tax basis, Ford lost $1.8 billion in the quarter, compared with a profit of $477 million a year ago.
First-quarter revenue, reflecting the recessionary economy around the globe, plummeted to $24.8 billion, down from $39.2 billion a year ago. Ford said the drop was due to lower vehicle sales but also unfavorable excchange, partly offset by higher net pricing.
Ford closed the quarter with $21.3 billion in automotive cash on hand. Cash flow remained negative at $3.7 billion in the quarter.
Ford took a $362 million in the quarter related to the Volvo and headcount reduction programs globally.
Region by Region
In North America, Ford's losses deepened to $637 million, compared with a loss of $45 million a year ago. Still, North American results improved by $1.3 billion compared with the fourth-quarter of 2008. Nosediving sales in North America showed up in Ford's first-quarter revenues in North America, which fell to $10.2 billion, down from $17.1 billion.
Industry sales dropped in the first quarter to an Seasonally Adjusted Annualized Rate (SAAR) of 9.8 million, compared with a first-quarter 2008 SAAR of 15.6 million vehicle sales.
In Europe, Ford lost $550 million compared with a profit of $739 million, largely due to lower volume. First-quarter revenue was $6 billion, down from $10.2 billion a year ago. Still, Ford increased its first-quarter market share to 9.4 percent, the highest level in nearly a decade. The Ford Fiesta became the best-selling vehicle in Europe in March, surpassing the Volkswagen Golf.
In South America, Ford reported a $63-million profit, compared with a $257 million profit a year ago. The decline was due mostly to unfavorable exchange rates and higher commodity costs. First-quarter revenue was $1.4 billion, down from $1.8 billion.
In Asia Pacific and Africa, Ford loss $96 million compared with a $1-million profit a year ago. First quarter revenue was $1.2 billion, down from $1.7 billion.
Volvo: Losses Continue
Ford continues to talk with interested parties about buying Swedish marque Volvo. Meantime, Volvo reported a loss of $255 million, compared with a loss of $151 million a year ago. First-quarter revenues were $2.6 billion, down from $4.2 billion. Volvo sold 69,000 vehicles in the first quarter compared with 106,000 in the year-ago quarter. In addition to lower volume, Volvo was forced to spend more on incentives in the U.S. and Europe than a year ago, causing net pricing to be $100 million lower.
Ford said it reduced losses at Volvo by $500 million compared with the fourth quarter, due to structural cost reductions and favorable exchange rates. Volvo has dramatically reduced its workforce in recent months.
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