Ford swings to a loss

Ford Motor Co. yesterday said it swung to a loss in the third quarter as sales of high-margin sport utility vehicles declined and its key North American unit remained in the red.

The No. 2 US automaker, facing a deepening financial crisis, reported a net loss of $284 million or 15 cents per share, compared with a profit of $266 million, or 15 cents a share, a year earlier.

Excluding special charges, the company lost $191 million, or 10 cents a share, a penny worse than the average forecast of analysts polled by Reuters Estimates.

Ford said charges related to a bailout of former parts subsidiary Visteon Corp., job cuts and other items were partially offset by a gain on the sale of a non-core business during the quarter.

The automaker, which cut its fourth-quarter production target by 2.4 per cent to 810,000 vehicles, said it expects full-year profit to be at the lower end of its forecast range of $1 to $1.25 per share.

The third-quarter loss, the first for the automaker since the fourth quarter of 2003, follows a protracted decline in its US market share. US sales of Ford vehicles are down 1.3 per cent so far this year despite a massive discount programme that helped clear inventory of unsold vehicles.

Ford and cross-town rival General Motors Corp., which reported a $1.6 billion quarterly loss earlier this week, have seen their margins squeezed by intense competition in the US market and by a dramatic slowdown in sales of once profitable mid-size and large SUVs amid high US gasoline prices.

The companies are also struggling with higher costs and a cut in their credit ratings to high-yield or "junk" status this year.

Dearborn, Michigan-based Ford said third-quarter revenue rose to $40.86 billion from $39.1 billion a year earlier.

Its auto operations posted a loss of $1.3 billion before taxes and excluding special charges, while its finance arm contributed to a net profit of $577 million. In North America, Ford lost $1.2 billion during the quarter, before taxes and excluding special items.

The company blamed lower dealer inventories, unfavourable vehicle mix, lower pricing and higher warranty and material costs for the loss in North America, which is Ford's largest revenue-generating unit.

Ford's luxury brands, grouped under the Premier Automotive Group, narrowed their pretax loss to $108 million from $171 million a year earlier.

Despite the third-quarter net loss, Ford remains in the black for the year as a whole, while GM has lost about $3.8 billion through the first nine months of the year. Earlier this week, GM announced a deal with the United Auto Workers union to slash its multibillion-dollar health care costs and said it was exploring the possible sale of a big stake in its finance arm.

However, pressure is building on Ford to reveal its plan for cutting costs and capacity in its North America division, which has lost more than $1.4 billion before taxes so far this year.

The automaker has said it will announce a restructuring plan this fall and has not ruled out deeper job cuts in its salaried workforce and the closing of manufacturing plants.

"While fundamentals are admittedly weak, given the stock's weak recent performance, we are reluctant to get incrementally bearish, particularly ahead of a potential restructuring announcement," JP Morgan analyst Himanshu Patel said of Ford in a note to subscribers.

"That said, we continue to favour GM over Ford due to the former's more favourable 2006 product cycle and its more aggressive restructuring approach."