Reflecting the situation at crosstown rival General Motors, which reported third quarter results on Wednesday, Ford did much better in Q3 2003 as a money lender than a vehicle maker. Its credit arm reported record net profit of $504 million, up $210 million from earnings of $294 million in the same period a year earlier. But the company as a whole on Thursday reported a net loss of $US25 million, or 1 cent per share, compared with a net loss of $326 million, or 18 cents per share in Q3, 2002. Wire service reports said this was smaller than analysts had expected.
However Ford said that European restructuring – job cuts in the United Kingdom and Germany and a shift removal in Genk, Belgium that cost it $56 million in the third quarter of 2003 – were expected to hit fourth quarter results by between $550 million and $600 million.
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On a pre-tax basis, Ford’s worldwide automotive sector reported a loss of $609 million during the third quarter of 2003, compared with a loss of $618 million a year ago.
North America Automotive results slumped to a loss of $116 million on a pre-tax basis, compared with a pre-tax profit of $591 million in the third quarter of 2002 and Ford Europe incurred a pre-tax loss of $452 million in the third quarter, compared with a pre-tax loss of $246 million during the 2002 period.
Ford noted that adopting a new accounting standard required in the United States reduced its third-quarter net profit by $264 million, or 14 cents per share.
Operating profit, before the effect of the change in accounting principles, was $237 million, or 13 cents per share, compared with a loss of $244 million, or 14 cents per share, in the third quarter of 2002.
Ford said that, if the $56 million third-quarter restructuring charge was excluded, its third-quarter operating profit was 15 cents per share, well above the First Call consensus estimate of analysts of a loss of 11 cents per share.
Third-quarter 2003 total revenue declined to $36.9 billion from $39.3 billion in the year-ago period, primarily reflecting lower vehicle-unit sales.
Worldwide automotive revenue for the third quarter declined 6.5 percent, or $2.1 billion, to $30.3 billion during the third quarter of 2003. Worldwide vehicle-unit sales in the quarter were 1,410,000, down from 1,656,000 units in the 2002 third quarter.
North America Automotive reported a loss of $116 million on a pre-tax basis, compared with a pre-tax profit of $591 million in the third quarter of 2002. The decline primarily reflects lower market share and a planned reduction in dealer stocks, related primarily to the F-150, Freestar and Monterey changeovers. Favourable cost performance and product mix were partial offsets.
North America Automotive revenue in the third quarter was $17.9 billion, down from $21.3 billion in the 2002 third quarter, primarily reflecting lower sales volume, partially offset by improved product mix.
The 2003 third-quarter pre-tax loss for International Automotive was $494 million, compared with a loss of $714 million for the year-ago period.
Ford Europe incurred a pre-tax loss of $452 million in the third quarter, compared with a pre-tax loss of $246 million during the 2002 period. The decline primarily reflects a planned reduction in dealer stocks; unfavourable net pricing, product mix and exchange rates; and the restructuring charge of $56 million, partially offset by cost improvements. Ford Europe’s revenue in the third quarter was $4.7 billion, compared with $4.4 billion during the third quarter of 2002.
The pre-tax loss for Ford South America narrowed to $26 million during the third quarter from a loss of $243 million during the year-ago period, primarily reflecting favourable exchange rates as well as improved net pricing and market share. Third-quarter revenue in South America rose to $500 million, compared with $400 million in the third quarter of 2002.
Ford Asia-Pacific reported a pre-tax profit of $1 million, compared with a pre-tax loss of $49 million in the same period last year. The improvement reflected higher industry volumes and market share as well as favourable exchange rates, partially offset by higher development costs for new products. Revenue rose to $1.6 billion, compared with $1.1 billion during the third quarter of 2002.
PAG reported a pre-tax loss of $22 million for the third quarter, compared with a pre-tax loss of $160 million for the third quarter of 2002. PAG’s improvement reflected favourable vehicle mix and lower costs, partially offset by unfavourable exchange rates. Third- quarter revenue for PAG was $5.6 billion, compared with $4.9 billion a year ago.
Ford Motor Credit Company reported record net income of $504 million for the third quarter of 2003, up $210 million from earnings of $294 million in the same period a year earlier. On a pre-tax basis, Ford Credit earned $809 million in the third quarter of 2003 compared with $460 million in the third quarter of 2002. The increase in earnings primarily reflected a lower provision for credit losses, the favourable impact of the interest rate environment on borrowing costs, and the favourable market valuation of derivative instruments.
Hertz reported pre-tax earnings of $186 million in the third quarter, compared with $160 million during the same period a year ago. The result is attributable to strong cost performance and higher rental volumes, partially offset by lower pricing.
Based on continued strong performance in the financial services group, Ford is revising its full-year earnings guidance from $0.70 per share to $0.95 to $1.05 per share, based on operating profit, excluding special items.
