Ford’s red ink-tinged third quarter results announced on Thursday showed that a reduced profit from finance operations and gains made by South American and Asia-Pacific automotive operations were not enough to save it from horrendous results in North America and a slight improvement in European and Premier Automotive Group losses.
On a pre-tax basis, worldwide automotive losses in the third quarter were $US1.3 billion, a decline of $732 million from a loss of $609 million during the same period a year ago.
Yet worldwide automotive sales for the third quarter rose to $34.7 billion from $32.8 billion in the same period last year. Worldwide vehicle-unit sales in the quarter were 1,531,000, up from 1,508,000 a year ago.
Overall, Ford Motor Company reported a net loss of 15 cents per share, or $284 million, for the third quarter of 2005, compared with net income of 15 cents per share, or $266 million, in the third quarter of 2004.
The Q3 loss from continuing operations, excluding special items, was 10 cents per share, or $191 million, compared to a profit of 27 cents per share, or $515 million, in the same period last year.
Total sales and revenue in the third quarter was $40.9 billion, compared to $39.1 billion a year ago.
For Q3, the Americas reported a pre-tax loss of $1.1 billion, a decline of $648 million from a $422 million pre-tax loss in the same period a year ago.
North American automotive operations reported a pre-tax loss of $1.2 billion, a decline of $685 million from a $481 million pre-tax loss a year ago. Lower dealer inventories, unfavourable vehicle mix, lower net pricing and higher warranty and material costs contributed to the deterioration. Higher industry volumes and market share were partial offsets.
Included in the higher warranty costs, though, was the favourable impact of the $240 million settlement reached with Bridgestone Firestone regarding Firestone’s August 2000 voluntary safety recall and Ford’s May 2001 tyre replacement programme.
Sales were $18.2 billion, up $59 million from the same period a year ago.
South American automotive operations reported a third-quarter pre-tax profit of $96 million, an increase of $37 million from a $59 million pre-tax profit a year ago. Sales for the third quarter improved to $1.2 billion from $784 million in 2004.
Ford Europe And Premier Automotive Group (PAG)
The Q3 combined pre-tax loss for Ford Europe and PAG automotive operations was $163 million – an improvement of $41 million compared with a loss of $204 million a year ago.
Ford Europe’s third-quarter pre-tax loss was $55 million, compared with a pre-tax loss of $33 million during the 2004 period due to higher material costs offset by higher net pricing and higher subsidiary profits.
Sales in the third quarter were $6.4 billion, compared with $5.9 billion during the third quarter of 2004.
Premier Automotive Group reported a pre-tax loss of $108 million for the third quarter, compared with a pre-tax loss of $171 million for the same period in 2004. New products and improved net pricing, primarily at Land Rover, helped but were offset by unfavourable currency exchange.
Third-quarter sales for PAG were $6.8 billion, compared with $6.1 billion a year ago.
Q3 combined pre-tax profit for Ford Asia-Pacific and Africa/Mazda was $133 million, an improvement of $85 million compared with a profit of $48 million last year.
Ford Asia-Pacific and Africa reported a pre-tax profit of $21 million, a decline of $14 million from a $35 million pre-tax profit a year ago, due primarily ro a higher mix of smaller cars, partially offset by improved net pricing.
Sales were $1.9 billion, unchanged from third quarter 2004.
Ford’s share of Q3 Mazda profits and associated operations was $112 million, an improvement of $99 million from $13 million a year ago. The improvement was due to gains on Ford’s investment in Mazda’s convertible bonds and improved operating results.
Third-quarter earnings included a loss of $241 million in other automotive financial results, a decline of $210 million from the same period last year, primarily reflecting the non-recurrence of tax-related interest income on refund claims received last year.
Ford Motor Credit
The finance arm reported net income of $577 million in the third quarter of 2005, down $157 million from a year earlier. On a pre-tax basis from continuing operations, FMC earned $901 million in the third quarter, compared with $1.1 billion in the previous year.
The decrease in earnings was primarily due to higher borrowing costs and the impact of lower receivable levels, partially offset by improved credit loss performance.
Hertz reported a third-quarter pre-tax profit of $262 million, up $13 million over 2004, due to higher car and equipment rental volume, partially offset by lower pricing.
“As our results indicate, we face many challenges in this competitive and difficult environment,” said Ford chairman and chief executive officer Bill Ford. “We have demonstrated throughout the year that we will continue to take the actions necessary to return our core business to sustainable profitability. We understand the issues, our priorities, and have the right team in place to get the job done.”
Third-quarter actions included finalisation of the Visteon agreement, an agreement to sell Hertz, the launch of a new supply base consolidation plan, announcement of an innovation initiative, including a tenfold increase in annual hybrid vehicle production by 2010, continued global personnel reductions and a number of product launches around the world.
Chief financial officer Don Leclair said: “We expect the fourth quarter to be another extremely competitive period. Our new products put us in an excellent position to compete in the marketplace. We will continue the turnaround in our operations in Europe, the investment in growth in Asia, and to address our issues in North America.”
Ford’s 2005 full-year earnings guidance is expected to be at the low end of the current guidance range of $1.00 to $1.25 per share, excluding the effect of special items and discontinued operations.