Ford on Wednesday announced a fourth quarter 2008 net loss of US$5.9bn, or $2.46 per share, and a pre-tax loss of $3.7bn, excluding special items, but insisted it had sufficient liquidity to fund its auto operations, despite burning through $5.5bn of cash in the fourth quarter.
Contributing factors to a $7.2bn negative operating-related cash flow included a global automotive pre-tax loss of $3.3bn, excluding special items, capital spending during the quarter about $600m higher than depreciation and amortisation, mostly because of costs associated with the launch of the redesigned F-150 truck line in North America, plus the favourable impact of second quarter asset impairments on depreciation and amortisation, the automaker said.
Ford said automotive cash flow during the fourth quarter was significantly affected by declining global demand but added it expects “significantly less” outflows in 2009 versus 2008 due to lower capital spending, structural cost reductions, lower inventories and other factors.
“Based on current planning assumptions, Ford has sufficient automotive liquidity to fund its business plan and product investments and does not need a bridge loan from the US government barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company’s supply base, dealers or creditors,” the automaker said in its results statement.
Ford said it had total liquidity of $24bn, including automotive gross cash of $13.4bn, at 31 December but added it would draw its available credit lines “due to concerns about the instability of the capital markets with the uncertain state of the economy.”

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By GlobalData“Ford went to the credit markets two years ago when they were functioning normally and obtained the funding necessary – including our credit lines – to support our product transformation and restructuring,” president and CEO Alan Mulally said.
“Given the instability of the capital markets with the uncertain state of the global economy, we believe it is prudent to draw these credit facilities at this time.”
The extra $10.1bn would be added to company cash for the first quarter of 2009.
Analysts had expected a last quarter loss of $1.22 per share before one-off items, according to a Reuters Estimates poll, equivalent to a loss of more than US$2.8bn.
Ford said it had reduced automotive costs by $1.4bn in the fourth quarter and by $4.4bn in 2008 versus 2007 levels. It had also “decisively reduced” global dealer stocks by more over 50,000 vehicles compared with the third quarter and now has among the lowest days’ supply in the industry.
It said it had achieved $5.1bn in North America cost reductions for full year 2008 compared with 2005, excluding the favourable effects of depreciation and asset impairment amortisation at the end of the second quarter and added that he United Auto Workers union had agreed (as it has with GM and Chrysler) to end the costly ‘jobs bank’ which pays idled workers for time off. Details are currently being worked out with the union.
Ford insisted it was still “on track” for both its overall and its North American automotive pre-tax results to be at or above breakeven in 2011, excluding special items.
The fourth quarter pre-tax operating loss from continuing operations, excluding special items, was $3.7bn, a further decline from the loss of $620m a year ago.
On an after-tax basis, Ford lost $3.3bn in the fourth quarter or $1.37 per share, compared with a $487m loss, or 23 cents per share, in 2007.
“Ford and the entire auto industry faced an extraordinary slowdown in all major global markets in the fourth quarter that clearly had an impact on our results,” said Mulally.
“We continued to take the decisive actions necessary to lower production to match the lower worldwide demand and reduce costs, which we expect will allow us to significantly reduce negative operating cash flow in 2009 and position Ford for growth when the economy rebounds.
“Our market share growth in the fourth quarter in the US and Europe [where the redesigned Fiesta and Ka were launched in Q4] is a positive sign that customers recognize the value of our new products and understand that a new and different Ford is emerging.”
Ford also said it remains on track for both its overall and North American Automotive pre-tax results to be
breakeven or profitable in 2011 – excluding special items – based on current planning assumptions.
Fourth quarter revenue was $29.2bn, down from $45.5bn a year ago, due to lower volume, the sale of Jaguar Land Rover and exchange factors.
Special items reduced pre-tax profits by $1.4bn in the fourth quarter, or $1.09 per share, these were largely costs associated with global workforce reductions and retiree health care charges related to the VEBA agreement with the UAW.
Worldwide Automotive revenue in the fourth quarter was $25.3bn, down from $40.8bn a year ago.
Total vehicle wholesales in the fourth quarter were 1,138,000, compared with 1,643,000 units a year ago.
For the fourth quarter, Ford North America reported a pre-tax loss of $1.9bn, compared with a loss of $1.5bn in 2007.
South America posted a pre-tax profit of $105m versus $418m. Fourth quarter revenue was down to $1.7bn from $2.4bn.
Ford Europe reported a pre-tax loss of $330m, down sharply from last year’s $223m profit as lower volume and exchange factors hit. Fourth quarter revenue was $7.6bn, down from $10.4bn a year ago.
Volvo reported a pre-tax loss of $736m, compared with breakeven a year ago.
Fourth quarter revenue was down from $5.1bn to $3.3bn.
The Asia Pacific and Africa pre-tax loss of $208m compared with a $10m profit a year ago. Fourth quarter revenue was $1.4bn, down from $1.7bn.
Ford reported a pre-tax profit of $79m from its investment in Mazda in the fourth quarter, compared with $75m a year ago. This was the last quarter Ford will report its share of Mazda profits following the sale of a portion of its ownership stake.
The financial services sector reported a pre-tax loss of $384m, compared with a profit of $269m in Q4 2007.
Ford Credit reported a pre-tax loss of $372m versus a $263m pre-tax profit last year.
Ford said it expects weak volumes this year in all markets, with worldwide sales down more than 10%.
“Significant government policy stimulus is being implemented in most markets and is expected to improve the environment for sales later this year,” the automaker said, adding: “However, financial markets remain under significant stress, and further government and central bank actions to provide liquidity and stabilise banks are needed.”