3rd UPDATE: Ford Posts 1Q Loss Of $1.4 Billion; Slows Cash Burn
24 April 2009 - 8:51PM
Dow Jones News
Ford Motor Co. (F) has enough money to survive the year without
any federal aid after it slowed its cash burn and reported a
smaller-than-expected first-quarter loss.
Ford's net loss was $1.4 billion, or 60 cents a share, compared
with a profit of $70 million or 3 cents, for the same period a year
earlier. Revenue declined 37% to $24.8 billion excluding the Land
Rover and Jaguar units which were sold in June.
Excluding one-time items, the loss was $1.8 billion, or 75 cents
a share beating the average analyst estimate of a per-share loss of
$1.23, according to Thomson Reuters.
Shares jumped as high as $5.45 in earlier trading before falling
back to $5.22 recently. The stock is now trading a six-month
high.
"Management still says Ford does not expect to need government
loans, but we are not yet convinced the automaker is out of
trouble," Morningstar Inc. auto analyst David Whiston said in a
research note Friday.
"Still, we are encouraged to see that automotive structural
costs declined by $1.9 billion in the quarter and that management
expects to reduce these costs by more than the $4 billion goal
previously in place for 2009."
Ford Chief Financial Officer Lewis Booth said cash burn dropped
to $3.7 billion compared to $5.5 billion spent in the
fourth-quarter. He also expects cash burn to remain below the $21.2
billion rate for 2008.
Ford finished the quarter with $21.3 billion in cash and still
expects to return to profitability, excluding special items, by
2011.
Ford, like competitors General Motors Corp. (GM) and Chrysler
LLC, still faces a historic downturn in automotive sales in the
U.S. and Europe amid a global recession.
The company said seasonally-adjusted industry sales in North
America were expected to be at the lower end of its 10.5 million to
12.5 million planning range. Industry sales in the first quarter
ran at an annualized rate of 9.8 million.
There is a potential for upside in U.S. sales in the second half
of the year, but North American output will be cut by 36% to
435,000 vehicles during this quarter.
Global Volume
Global auto industry volume will fall 15% this year, though
sales in Europe are running ahead of Ford's own planning
assumptions. Booth said the pace of the sales decline in Europe was
running at about half of that seen in the U.S., buoyed by
government programs such as subsidies for the scrapping of old
cars.
A GM or Chrysler bankruptcy may further depress U.S. sales as
consumers shy away from purchases.
Chrysler has until April 30 to meet a federal mandated deadline
to cut costs and merge with Italian-based Fiat SpA. GM has until
June 1 to cut its costs.
Ford is also vulnerable to part supplier problems. Parts makers,
already financially stressed, will be hit again after General
Motors Corp. (GM) said it will cut output by 25% over the next
three months to control inventory levels. Many of GM's suppliers
also provide parts to Ford.
"To date, the health of the supply base is the most critical
issue," Chief Executive Officer Alan Mulally said.
Mulally declined to address whether the federal government
should change terms of an aid program designed to help accelerate
payments and insure receivables. Suppliers must pay to participate
in the programs administered by GM and Chrysler. Ford isn't
participating.
Volvo Charge
Ford said the pretax loss of its North American unit widened to
$637 million from a loss of $45 million a year earlier. South
America profit narrowed to $63 million from $257 million for the
same period a year earlier.
The auto maker's European unit swung to a loss of $550 million
compared with a profit of $739 million.
Ford took a $664 million charge against the book value of the
loss-making Volvo Cars unit it is seeking to sell.
The Swedish brand has been a significant drain on Ford, and the
charge reflects the difference between Volvo's undisclosed book
value and Ford's estimate of its fair market value. CEO Mulally
said talks continue with unnamed "interested parties" to offload
Volvo.
-By Jeff Bennett, Dow Jones Newswires;
jeff.bennett@dowjones.com; 248-204-5542
(Doug Cameron contributed to this story)