Rense.com
Ford Back In Red -
Pension Liability Soars
By Tom Brown
10-17-2
| DEARBORN, Mich. (Reuters) - Ford
Motor Co. F.N , slipped back into the red in the third quarter, amid mounting
concerns about the pace of its restructuring efforts, after snapping a
year-long losing streak when it returned to profitability in the second
quarter. On Wednesday, the world's No. 2 automaker reported a third-quarter net loss of $326 million compared with a loss of $692 million in the same quarter last year. Before special items, including a writedown of about $500 million for its loss-making sale of Kwik-Fit, a Britain-based vehicle repair chain, Ford said it posted a profit of $220 million or 12 cents per share. While that was about four times better than Wall Street estimates, some analysts said the numbers were overshadowed by much larger concerns about a company that lost $5.45 billion last year. "Third quarter I think is really a non-issue at this stage," said Bear Stearns & Co. auto analyst Domenic Martilotti. Among those concerns, Ford said the return on its U.S. pension fund assets was down 15 percent year-to-date, pushing the fund's underfunding status to $6.5 billion in the third quarter from $3.2 billion at the close of the second quarter. About 70 percent of Ford's pension fund assets are invested in stocks. In slides accompanying its earnings statement, Ford said its strong cash position, with a horde of about $25.7 billion as of Sept. 30, would facilitate the management of its pension obligations. Tax rebates accounted for more than twice the increase in Ford's gross cash position over the second quarter, however, and cash flow may not be sustainable going forward. Ford Chairman and Chief Executive Bill Ford Jr. has insisted that the company's nine-month-old turnaround plan, focused largely on cost cuts aimed at generating $7 billion in pre-tax annual profits by mid-decade, is gaining traction after a slow start earlier in the year. But skeptical investors have hammered shares of the corporate giant to 10-year lows in recent weeks, as it was buffeted by analyst reports about cash and market share erosion, Ford's enormous debt and pension liabilities and the capital injections needed to support consumer incentives such as interest-free financing. Chief Financial Officer Allan Gilmour said in a statement accompanying Ford's financial results that the company sees a slight profit for the fourth quarter and a full-year profit of about 40 cents per share, within the range of analysts' forecasts. NARROW MARGINS But Ford's results showed that it lost about $53 for every vehicle built in North America in the third quarter. That compares to a profit of $351 for every vehicle built by General Motor's Corp. GM.N , Ford's leading rival. There are signs of improvement, however. Ford lost $1,044 for every vehicle it built in North America in the third quarter last year. Ford's U.S. marketing costs, including incentives such as cash rebates, represented 15.9 percent of its revenue in the third quarter, up from 15.6 percent in the second quarter but down slightly from the third quarter last year. Shares of Ford have fallen about 44 percent and underperformed those of GM by around 25 percent since the start of the year. In preopen trading, Ford shares were down about 4 percent to $8.50 from Tuesday's close of $8.87. In an interview late on Tuesday, David Cole, veteran head of the Ann Arbor, Michigan-based Center for Automotive Research, said no one should underestimate the issues confronting Ford and what he described as its worst crisis in 30 or 40 years. "It's absolutely necessary for them to shrink, rationalize their business, restructure what they're doing and with that then create the platform going forward for success and profitability," said Cole. "They have to do what they're doing and they have to do it as quickly as possible and the alternative to not doing it is pretty abysmal," he said. |
MainPage
http://www.rense.com
This Site Served by TheHostPros