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Ford Lowers 2005 Profit Forecast, Will Cut More Jobs (Update4)

Ford Lowers 2005 Profit Forecast, Will Cut More Jobs

June 21 (Bloomberg) -- Ford Motor Co., the No. 2 U.S. automaker, cut its 2005 earnings forecast for the second time this year and said it will eliminate about 1,700 more jobs because of weak sales in North America.

Profit is expected to be $1 to $1.25 a share, excluding some costs, compared with a previous forecast of $1.25 to $1.50, the Dearborn, Michigan-based company said in a statement today. Ford on April 8 lowered the forecast from a range of $1.75 to $1.95.

``I'm not surprised,'' Brian Bruce, who helps manage $18 billion in equity including Ford shares for PanAgora Asset Management in Boston, said in an e-mail interview. ``Sales are still not where they need to be.''

Ford said it will trim 5 percent of salaried jobs in North America, in addition to a cut of 1,000 such positions in the U.S. announced in April. Chief Financial Officer Don Leclair said in an interview that the latest reduction applies to about 35,000 employees at the Ford, Lincoln and Mercury brands.

The automaker's U.S. sales fell 5.7 percent this year through May, compared with an industrywide decline of 1 percent. Ford's first-quarter net income slid 38 percent and Standard & Poor's in May lowered its rating on the company's debt to junk status. The automaker has been hurt by market-share losses to Asian competitors including Toyota Motor Corp.

Ford today said it also is eliminating 2005 bonuses for managers worldwide and is suspending matching grants for salaried- worker 401(k) retirement plans effective July 1. North American use of agency and purchased services will be cut 10 percent.

`Supplier-Related Challenges'

The automaker said ``continued supplier-related challenges'' contributed to the lower profit forecast, without giving details. Ford is taking over 24 plants of its former parts unit, Visteon Corp., to help the supplier cut costs.

Ford has been pressured ``on the revenue side and the cost side'' from rising raw-material price, Leclair said.

Its shares fell 41 cents, or 3.7 percent, to $10.76 in trading after the close of the New York Stock Exchange. The lowered forecast was announced after the exchange closed. In NYSE composite trading, the shares rose 6 cents to $11.17.

Ford spokesman Oscar Suris said he couldn't estimate how much the company will save from the moves announced today. Ford matches 60 cents for every $1 employees contribute to 401(k) plans, up to 5 percent of their annual salary, he said.

Second-Quarter Forecast Raised

The automaker raised its second-quarter profit forecast to 30 cents to 35 cents a share, excluding some costs, because of a reduced tax rate and better-than-expected results at Ford Motor Credit Co., which makes loans to buyers of Ford-produced cars and trucks. The previous second-quarter forecast was breakeven to 15 cents a share, excluding some costs.

Ford doesn't make forecasts on a net-income basis. The company estimated that special items would increase the second- quarter earnings by 2 cents a share and reduce full-year profit by at least 8 cents a share.

The company was expected to earn $1.16 a share this year, the average estimate of 16 analysts surveyed by Thomson Financial. The second-quarter average estimate was 13 cents.

Net income for all of 2004 was $3.49 billion, or $1.73 a share. Net income in last year's second quarter was $1.17 billion, or 57 cents.

Ford's U.S. sales have fallen this year amid mixed results for new models that Chief Executive William Clay Ford Jr., 48, was counting on to boost market share.

Sales of the redesigned 2005 Mustang sports car rose 25 percent in the first five months. The Flat Rock, Michigan, plant that produces the car is running overtime.

Sales have fallen 6.4 percent for F-Series pickups, the industry's largest-selling line of vehicles, and 25 percent for the Explorer, the top-selling sport-utility vehicle.

The declines have ``mainly been in the SUV area and in older products,'' Leclair said.

`On Its Own'

``The Mustang is out there on its own,'' said analyst Joe Langley at automotive forecaster CSM Worldwide in Farmington, Michigan.

Ford's market share through May fell 1 percentage point to 19.1 percent, according to Autodata Corp.

The declining sales spurred Ford to cut North American production about 10 percent in the first quarter and 4.8 percent in the current quarter from a year earlier. Ford said June 1 that third-quarter output in the region will fall 2.3 percent.

The automaker plans to revamp the plants it's taking back from Visteon and sell most of them. Ford said it's helping Visteon, its biggest supplier, to secure a steady flow of parts.

Ford also has 17,400 employees stationed at Visteon plants, a cost the supplier said it couldn't afford. Ford pays the workers and Visteon reimburses the cost of wages and benefits. About 5,000 of the workers will be offered buyouts.

The automaker's Hertz rental-car unit in a June 13 filing with the Securities and Exchange Commission said it planned an initial public offering of shares. Hertz didn't say when the stock sale might occur or how many shares would be sold at what price. Ford also is examining the possibility of selling all of Hertz to another entity, spokesman Glenn Ray said at that time.

Bill Ford told reporters on April 20 that the automaker might sell Hertz to raise money for its auto operations.

To contact the reporter of this story:
Bill Koenig in Southfield, Michigan, at [e-mail]


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