Ford Motor Company has reported a stunning 2006 full-year net loss of $12.7bn, or $6.79 per share compared with net income of $1.4bn, or 77 cents per share in 2005.
It was the biggest loss reported in the company’s 103 years, surpassing the $7.39bn shortfall posted in 1992.
Even excluding special items, the automaker’s full-year after-tax loss from continuing operations was $2.8bn, or $1.50 per share compared with earnings of $1.9bn, or $1.00 per share the previous year.
Special items primarily reflected costs associated with restructuring efforts and fixed asset impairments, and full-year results on an after-tax basis by $9.9bn or $5.29 per share. The total pre-tax effect of full-year special items was $11.9bn.
Full-year sales and revenue for 2006 was $160.1bn, compared to $176.9bn a year ago.
During a year in which former Boeing aircraft head Alan Mulally joined Ford as president and CEO, more than 38,000 of the automaker’s hourly employees accepted buy-out offers and efforts continued to axe the equivalent of 14,000 white-collar posts.
“We began aggressive actions in 2006 to restructure our automotive business so we can operate profitably at lower volumes and with a product mix that better reflects consumer demand for smaller, more fuel efficient vehicles,” said Mulally in a statement. “We fully recognise our business reality and are dealing with it. We have a plan and we are on track to deliver.”
Ford reported a net fourth quarter loss of $5.8bn, or $3.05 per share, compared to a net loss of $74m, or 4 cents per share, in 2005.
Excluding special items, the fourth-quarter after-tax loss from continuing operations totaled $2.1bn, or $1.10 per share, compared to a profit of $285m, or 15 cents per share, a year ago.
Special items in the quarter included the costs associated with North America restructuring efforts and, on an after-tax basis, reduced fourth-quarter earnings by $3.7bn or $1.95 per share. The total pre-tax effect of fourth-quarter special items was $3.8bn.
Total sales and revenue in the fourth quarter were $40.3bn, compared to $46.3bn a year ago.
For the full year, Ford’s worldwide automotive sector reported a pre-tax loss of $5.2bn, compared to a pre-tax loss of $993m a year ago. The decline primarily reflected unfavorable volume and mix, unfavorable net pricing and currency exchange, partially offset by favorable cost performance and higher interest income.
For the fourth quarter, the automotive sector reported a pre-tax loss of $2.5bn, compared to a pre-tax loss of $109m a year earlier. The decline primarily reflected adverse volume and mix and higher incentives in North America.
Worldwide automotive revenue for 2006 was $143.3bn, compared to $153.5bn a year ago. Total fourth-quarter automotive revenue was $36bn, a decrease from $40.7bn a year ago.
Total company vehicle wholesales in 2006 were 6,597,000, a decrease from 6,767,000 in 2005. Fourth-quarter vehicle wholesales totaled 1,568,000, compared to 1,737,000 units a year ago.
Ford’s North America Automotive operations reported a full-year pre-tax loss of $6.1bn, compared to a loss of $1.5bn in 2005.
North America’s sales totaled $69.4bn, compared to $80.6bn a year ago.
For the fourth quarter, North America Automotive operations reported a pre-tax loss of more than $2.8bn, compared to a pre-tax loss of $217m in 2005.
Fourth-quarter sales were $15.1bn, compared to $21.4bn in 2005.
South America Automotive operations reported a full-year pre-tax profit of $551m, a $152m increase from 2005. Full-year sales improved to $5.7bn from $4.4bn in 2005.
Ford Europe posted a full-year pre-tax profit of $469m, an improvement of $396m from a year ago. Sales totalled $30.4bn, compared to $29.9bn in 2005.
Premier Automotive Group (PAG) reported a full-year pre-tax loss of $327m, compared to a pre-tax loss of $89m a year ago. Ford said the decline was more than explained by prior model warranty accrual adjustments at Jaguar and Land Rover and unfavourable currency exchange rates, partially offset by other cost reductions and favourable mix and pricing. Full-year sales for the group totaled $30bn, compared to $30.3bn in 2005.
PAG reported Q4 a pre-tax profit of $191m, an improvement of $129m compared to the year-ago period, primarily reflecting favorable volume and mix at Volvo due to the introduction of new products, and favourable pricing at Jaguar and Land Rover, partially offset by the effect of a weaker US dollar against key European currencies. Fourth-quarter sales totaled $8.6bn, compared to $8bn a year ago.
Asia Pacific and Africa reported a full-year pre-tax loss of $185m, compared to a pre-tax profit of $61m a year ago. Full-year sales totaled $6.5bn, a decline from $7.7bn in 2005.
Ford’s share of the full-year pre-tax profit of Mazda and associated operations was $168m, compared to $255m a year ago. The decline was explained by the non-recurrence of gains on Mazda convertible bonds in 2005.
For the fourth quarter, Ford’s share was $51m, compared to $32m a year ago.
Full-year ‘other automotive’ 2006 results included a pre-tax profit of $247m, compared to a loss of $207m a year ago, reflecting primarily higher interest income.
For the full year, the Financial Services sector earned a pre-tax profit of more than $1.9bn, compared to $3.5bn the prior year. For the fourth quarter, the Financial Services sector earned a pre-tax profit of $416m, compared to $626m the prior year.
Ford Motor Credit Company reported net income of $1.3bn in 2006, down $621m from earnings of $1.9bn a year earlier.
The decrease in full-year earnings primarily reflected higher borrowing costs, higher depreciation expense and the impact of lower average receivable levels.
Ford expects market share and most earnings comparisons to remain challenging for the next two to three quarters.
US market share is expected to be down to the end of the third quarter of 2007, primarily due to lower fleet sales.
Production is expected to be down through the first half of 2007, but is expected to increase on a year-over-year basis in the second half of the year.
Ford expects the US industry to built 16.8m vehicles while Europe will make 17.6m.
Year-over-year third quarter comparisons will be impacted by the non-recurrence of tax-related interest income in 2006.
Essentially no tax offsets to losses will be recognised – negatively impacting the first nine months of comparisons.
The company’s structural cost reductions will continue to grow during the year as personnel are axed, plants are idled and capacity is reduced.
Special charges in 2007 are expected to be significantly lower than in 2006.
“While challenges lie ahead for us in 2007, we’re focused on making continuous improvements to our plan, so we can capitalize on opportunities to create and sell more products and save more costs,” Mulally said. “Our priorities, combined with our sense of urgency, will continue to transform Ford Motor Company.”