just-auto.com

USA: Ford reports $US326 million net loss for Q3 2002, operating profit is $220 million

By just-auto.com editorial team | 16 October 2002

Ford Motor Company lost $US326 million, or 18 cents per share, in the third quarter of 2002.

However, excluding charges related to the sale of Kwik-Fit and other unusual items, the company achieved an operating profit of $220 million, or 12 cents per share.

That compares with a loss of $502 million, or 28 cents per share, excluding unusual items, in the third quarter of 2001.

Ford's third quarter 2002 revenues were $39.6 billion, a 9% increase from last year's third quarter. Worldwide vehicle sales in the 2002 third quarter were 1,657,000 units -- also up 9% over the previous year's quarter.

"While we are pleased with our progress, we continue our work with a strong sense of urgency to restore our business to its full profit potential," said chairman and CEO Bill Ford.

Ford said it had made progress on reducing production capacity and overhead during the quarter and was on track to offset all product cost increases and reduce its material costs by $3 billion by mid-decade.

The sale of Kwik-Fit, a UK-based maintenance and light vehicle repair business, and Collision Team of America, a US-based chain of collision repair shops, improved the total cash received from the sale of non-core assets to more than $700 million in 2002. Ford still expects to get $1 billion in cash from the divestiture of non-core assets in 2002, though some will not be received until the first quarter of 2003.

Third quarter 2002 results included a $525 million loss on the agreement to sell Kwik-Fit and other businesses.

AUTOMOTIVE OPERATIONS

Ford's worldwide automotive operations reported a loss of $243 million in the third quarter, compared with a loss of $877 million one year ago. Revenues were $32.4 billion, compared with $28.4 billion a year ago.

In North America Ford posted a loss of $50 million in the third quarter, compared with a loss of $849 million one year ago. Higher volume, favourable net revenue and positive net cost performance largely accounted for the improvement.

In Europe, Ford lost $121 million compared with a loss of $24 million a year ago. The decline was largely due to higher marketing costs at Jaguar and Volvo and "increased product costs" at Jaguar (primarily due to the troubled introduction of aluminium body construction for the new XJ sedan which pushed back its launch by six months into early 2003).

Ford operations in South America reported a loss of $138 million, compared with a loss of $56 million a year ago, as unfavourable exchange rates more than offset improved cost performance. Economic and industry conditions in the region remain very difficult, the company noted.

Operations in the rest of the world earned a profit of $66 million, compared with a profit of $52 million a year ago, with the increase primarily reflecting improvements at Mazda whose new Demio (2) and Atenza (6) are proving popular with buyers at home and abroad.

CREDIT OPERATIONS

Ford Credit earned $408 million in the third quarter, up $19 million from earnings of $389 million in the same period a year earlier, with the improvement "more than accounted for" by lower provisions for credit losses. Profit was up $65 million from the second quarter, reflecting improved net financing margins and the favourable impact of securitisation transactions, offset partially by a higher provision for credit losses.

HERTZ

The Hertz rental car operation reported a third quarter profit of $106 million, up from last year's $26 million profit in the third quarter, citing the continued recovery of business and leisure travel as the principal reason for the increase.

OUTLOOK

"Our results have been better than we expected each quarter this year, causing us to remain cautiously optimistic as we move into the fourth quarter," said Ford chief financial officer Allan Gilmour.

"Many of our efforts to increase efficiency and improve our profitability are beginning to take hold, and we are projecting a slight profit for the fourth quarter and a full year profit of about 40 cents per share -- within the range of analysts' estimates of 35 to 55 cents per share."