Ford narrows loss and sees spin off deal
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DETROIT (Reuters) - Ford Motor Co posted a narrower-than-expected quarterly loss on Thursday and said it was nearing a deal to sell its British luxury brands Jaguar and Land Rover.
Ford, which has struggled with declining sales and falling U.S. market share, also said it was moving ahead of its own targets for its turnaround.
The No. 2 U.S. automaker said it was on track to reduce its expected cash burn by $5 billion and to post a narrower loss in the current quarter as it targets a return to profitability by 2009.
Ford also said it was taking Volvo off the auction block and would integrate the Swedish luxury brand more closely into purchasing and development efforts, although executives stopped short of ruling out an eventual sale.
Our plan now is to not sell it and to focus on improving especially the cost structure and the position of the brand, Chief Executive Alan Mulally said. It s what we ve decided for now is our focus.
By contrast, Ford said it expected to wrap up a deal to sell Jaguar and Land Rover by early next year, disbanding its stable of European premium brands that has been an inconsistent performer for the automaker.
Ford posted a third-quarter net loss of $380 million, or 19 cents per share, compared with a loss of $5.2 billion, or $2.79 a share a year earlier, when it took large restructuring charges.
Ford s loss from continuing operations, excluding one-time items, was 1 cent per share. That was sharply narrower than the average Wall Street forecast for a loss of 48 cents per share.
The narrower-than-expected loss was in sharp contrast to third-quarter results at General Motors Corp , which shocked Wall Street on Wednesday by reporting a record loss of $39 billion.
Bear Stearns analyst Peter Nesvold said the numbers showed Ford had more momentum behind its turnaround effort heading into 2008 than GM.
Ford s losses are at the bottom of its product cycle, which starts to improve by year-end 2008, Nesvold said in a note for clients.
GM s former finance subsidiary, GMAC, in which GM retains a 49 percent stake, was hurt by its exposure to the slumping market for housing finance. Ford s finance arm, Ford Motor Credit, has no exposure to that market. The Ford finance unit contributed $556 million in pre-tax third-quarter earnings.
Ford said it expects a cash outflow of $12 billion to $14 billion between this year and 2009, down from an earlier forecast for a $17 billion cash burn during that period as it closes plants and cuts workers.
Ford shares were up 3 cents to $8.27 in midday trade on the New York Stock Exchange.
UAW DEAL IN FOCUS
The improved Ford results come as its 58,000 factory workers represented by the United Auto Workers union begin a ratification vote on a proposed four-year contract.
Analysts have hailed the deal for its potential to slash Ford s labor costs by allowing the automaker to hire up to a fifth of its workers at half the wage rate of current employees and shift retiree health-care obligations to a new trust fund.
Ford said it had cut 6,500 factory jobs in North America during the third quarter, taking its total work force reduction to about 33,600 since late 2005.
In the crucial North American market, Ford posted a narrower loss of $1 billion in the third quarter before taxes and excluding special items, compared with a loss of $2.1 billion a year earlier.
That improvement reflected higher pricing as the automaker pulled away from cut-rate sales to car rental companies and held back from offering consumer incentives such as zero-percent financing.
Ford Chief Financial Officer Don Leclair said the decision to throttle back on sales incentives on the showroom floor had saved $500 million during the quarter.
Leclair cautioned that continued weakness in housing and rising gas prices could keep the U.S. market for new cars and trucks under pressure into 2009.
Ford has said U.S. sales of cars and light trucks could dip to about 15.7 million vehicles next year, extending a downturn that began in 2006.
Overall U.S. vehicle sales slipped 2 percent in 2006 and are expected to drop another 3 percent this year to just above 16 million vehicles, a level that would represent the industry s weakest year since 1998.
Ford has been in talks with a range of potential buyers for Jaguar and Land Rover, people familiar with the talks have said. Bidders include Indian car maker Tata Motors and buyout firms One Equity, Ripplewood and TPG, the sources said.
Ford, which has not broken out results for individual brands in the past, said it plans to disclose results for Volvo beginning in 2008. Ford acquired Volvo in 1999.
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Related: Ford narrows loss and sees spin off deal
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