Ford on Friday announced a net loss of US$1.4bn, or $0.60 per share, for the first quarter of 2009 and a pre-tax operating loss of $2bn, excluding special items. It reported net income of $70m, or $0.03 per share, in Q1 2008 and a $686m operating profit a year ago.
Go deeper with GlobalData
It said results for total company operations improved compared with the fourth quarter of 2008 and significantly reduced operating-related cash outflow compared with the third and fourth quarters of 2008 despite further declines in volume.
Chief financial officer Lewis Booth said he expected the automaker’s cash burn rate to be lower through the rest of the year.
Booth, speaking to Reuters after Ford posted the smaller than expected first-quarter loss, said he expected the $3.7 billion cash burn rate in the first quarter to be worst for the year.
He added he was encouraged by the automaker’s results and said Ford saw a modest improvement in vehicle transaction prices during the quarter and that it expected some improvement in the economic environment in the second half of the year.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe announcement of better than expected results led to a 16.93% rise in Ford’s share price to $5.25 in pre-market trading on the New York Stock Exchange today (as at 07.26EST).
In its results statement, Ford said it lost lost $1.8bn after tax in the first quarter, or $0.75 per share, compared with a profit of $477m, or $0.20 per share, a year ago.
“Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world,” said president and CEO Alan Mulally in the statement. “Despite the challenges, Ford made strong progress on our transformation plan by gaining share with strong new products, slowing operating-related cash outflows, reducing outstanding debt, lowering our structural costs and reaching new agreements with the UAW.”
The automaker ended the first quarter with $21.3bn in automotive gross cash and reiterated that it does not expect to seek a bridge loan from the US government.
Ford said it remains on track to meet or beat its financial targets, including the target for its overall and North American automotive pre-tax results to be break-even or better in 2011, excluding special items.
First quarter revenue, excluding special items, was $24.8bn, down from $39.2bn a year ago, due to lower sales and unfavourable exchange rates though this was partly offset by
higher net pricing.
Special items improved pre-tax profits by $362m in the first quarter, or $0.15 per share, which largely reflected gains from the debt restructuring completed in the first quarter partly offset by the effect of “held for sale” accounting for Volvo assets and global personnel cuts.
At the end of the first quarter, based on the status of Ford’s strategic review of Volvo, the company concluded that the criteria for “held for sale” status had been met, triggering an impairment test that resulted in an impairment charge of about $700m reflecting the difference between the book value and estimated fair market value of Volvo as held for sale net of the estimated disposal costs.
Automotive operating-related cash flow was $3.7bn negative during the first quarter of 2009 due mainly to an automotive pre-tax loss of $1.9bn, excluding special items; capital spending during the quarter that was about $300m higher than depreciation and changes in working capital resulted in over $1bn of positive cash flow due to higher payables, lower inventories and lower receivables. This improvement, though, was more than offset by timing differences in marketing, warranty, retiree health care payments and in-transit receivables and a $500m payment to Ford Credit.
“This outflow in the first quarter is less than half the outflows during each of the third and fourth quarters of 2008, despite a further decline in volume in part related to actions taken to reduce dealer stocks. The improvement is due primarily to improved working capital, lower automotive pre-tax losses and lower net spending,” Ford said, reiterating that it expects operating-related cash outflows in 2009 to be significantly less than 2008.
The company’s automotive gross cash increased by $7.9bn during the first quarter, primarily reflecting its draw of its revolving credit line of $10.1bn and the net impact of $2bn related to the conversion of the assets in the temporary asset account set aside for the VEBA healthcare trust into a new Ford note, announced in January.
“The successful debt restructuring, coupled with previously announced agreements with the United Auto Workers, will strengthen Ford’s balance sheet and will result in significant savings going forward,” said CFO Booth in the statement. “On the product side, our global lineup has never been stronger. We remain hopeful that the government stimulus actions around the world will help improve auto demand, particularly in the second half of this year.”
Ford Europe’s first quarter market share rose to 9.4%, the highest in nearly 10 years, US retail market share remained steady and dealer inventories fell 27% year on year bringing days’ supply to “competitive levels”.
Ford’s worldwide automotive sector reported a pre-tax operating loss of $1.9bn, versus pre-tax profit of $622m a year ago due to lower industry volumes and dealer stock reduction though this was partly offset by structural cost cuts.
Worldwide automotive revenue in the first quarter was $21.4bn, down from $35bn a year ago. Total vehicle wholesales in the first quarter were 973,000, compared with 1,531,000 units a year ago.
Automotive structural cost reductions totaled $1.9bn, including $1.3bn in North America.
Manufacturing and engineering costs were more than $800m lower, reflecting ongoing restructuring in North America, Europe and Volvo.
Ford North America reported a pre-tax loss of $637m, compared with a loss of $45m a year ago. First quarter revenue was $10.2bn, down from $17.1bn in Q1 2008. North American pre-tax results improved by $1.3bn compared to fourth quarter 2008.
Ford South America booked a pre-tax profit of $63m, compared with $257m a year ago due to unfavorable exchange and higher commodity costs, partly offset by more favourable net pricing. First quarter revenue was $1.4bn, down from $1.8bn in 2008.
Ford Europe plunged to a pre-tax loss of $550m, compared with a profit of $739m in 2008 as sales fell and dealers reduced stocks. First quarter revenue was $6bn, down from $10.2bn a year ago, reflecting, Ford said, the economic weakening in most European markets.
Volvo reported a pre-tax loss of $255m, compared with loss of $151m a year ago. First quarter revenue was $2.6bn, down from $4.2bn. Losses were reduced by nearly $500m compared with Q4 2008 as a result of structural cost reductions and favourable exchange.
Ford Asia Pacific and Africa’s pre-tax loss was $96m, compared with $1m profit last year. First quarter revenue was $1.2bn, down from $1.7bn a year ago.
The financial services sector booked a pre-tax loss of $62m, compared with a $64m profit in 2008.
Ford Credit’s $36m pretax loss compared with a $32m pre-tax profit a year ago as lower volume and a higher provision for credit losses, partly offset by lower depreciation expense for leased vehicles and lower net losses related to market valuation adjustments to derivatives, took a toll.
Outlook
Despite the severe global downturn, Ford said it continued to make progress on all four pillars of its plan: aggressively restructuring to operate profitably at the current demand level; speeding the development of new products that customers actually want, financing the plan and improving the balance sheet and “working together effectively as one team, leveraging Ford’s global assets”.
“Clearly, these continue to be challenging days for the global auto industry. I remain encouraged by the progress Ford is making to allow us to operate through the downturn and emerge as a lean, globally integrated automaker poised for profitable growth when the economy rebounds,” Mulally added.
“Ford continues to take decisive actions working with all of our stakeholders to ensure our long-term
competitiveness.”
