Ford reduces earnings forecasts - To axe 1,700 more white-collar jobs - 2005

[Marc]

From the Detroit Free Press:

Originally Posted by Detroit Free Press

Ford cuts more salaried jobs

Other white-collar staff lose 401(k) matches

June 22, 2005

BY JAMIE BUTTERS
FREE PRESS BUSINESS WRITER

Acknowledging that weak sales will reduce profits this year, Ford Motor Co. is cutting its salaried workforce and the compensation of remaining workers, the automaker said late Tuesday afternoon.

MORE BELT-TIGHTENING
Ford Motor Co. says its financial outlook for the rest of the year has worsened and that it will take the following steps:

# Cut 1,700 salaried North American automotive jobs, 5% of the total, by Oct. 1. This is on top of 1,000 job cuts announced in April.
# Eliminate 2005 bonuses for salaried management employees worldwide.
# Suspend 401(k) matches for salaried workers.
# Cut by 10% its use of agency and purchased services.
# Look for ways to cut personnel costs outside the United States.
# Reduce its estimate of 2005 profits to between $1 and $1.25 a share, excluding onetime losses and gains. The previous estimate was $1.25 to $1.50 per share. (Ford currently has about 1.8 million shares outstanding -- not counting bonds that can convert to common stock -- so a 25-cent reduction equals a drop in estimated profits of more than $400 million.)

Ford said it will eliminate 1,700 white-collar jobs, or 5% of its salaried positions in North American automotive operations, by Oct. 1, and slash its spending on agency or purchased services by 10% by July 1. Ford had already announced in April that it was cutting 1,000 salaried jobs.

Remaining workers will not get matches to investments in their 401(k) retirement accounts for the foreseeable future, beginning next month, and salaried managers worldwide will not receive bonuses for 2005, the company said.

For the second time this year, Ford cut the amount of money it is telling investors it will earn for the year.

Ford had been trying to steer clear of the negative attention showered on crosstown rival General Motors Corp., which in April withdrew any statements on expected 2005 profits and was rattled by corporate raider Kirk Kerkorian, who increased his stock ownership to 7.2% of the company.

Both automakers are struggling to keep their place in the market in the face of growing foreign competition. GM's eight brands have lost 1.5 points of U.S. market share through the first five months of this year to fall to 25.7%; Ford's six main brands have lost 1 point to drop to 19.1%.

But Ford Motor has had to lower its outlook repeatedly in the first half of this year.

Earlier this year, Chairman and Chief Executive Officer Bill Ford had said that the company would not meet its longstanding goal of earning $7 billion before taxes next year, saying that the needed cuts could do permanent damage to the company.

In April, the automaker trimmed its earnings guidance for the year from a range of $1.75 to $1.90 per share to a range of $1.25 to $1.50.

On Tuesday, the guidance was shaved again to a range of $1 to $1.25 per share.

Such guidance to Wall Street analysts excludes onetime expenses and gains.

The announcement, released under the headline "Ford updates earnings guidance for 2005," was made at 4:01 p.m., right after trading ended for the day.

Ford shares had closed at $11.17 after gaining 6 cents, or 0.5%, for the day. In after-hours trading, the shares fell to $10.75, a drop of 42 cents, or 3.8%.

Ford also cited "continued supplier-related challenges." In an interview, Chief Financial Officer Don Leclair said that higher prices for steel and other raw materials, combined with lower production at Ford and GM, were making it hard for suppliers to pass on savings to automakers.

Last month, Ford reached an agreement with former subsidiary and largest supplier Visteon Corp., under which Ford would take back control of 15 plants where workers are represented by the UAW and nine other related facilities. The deal would cost Ford at least $1 billion up-front, but the automaker said it would lead to savings of up to $700 million a year by the end of the decade.

As at GM, Ford's biggest problems have been in the North American automotive market.

While strong profits continue to flow from Ford Credit -- the financing unit was spared any job cuts -- it has not been enough to make up for flagging sales and the shifting of consumer tastes from high-profit trucks to cars.

Last month at the company's 50th annual shareholders meeting in Wilmington, Del., Bill Ford called automotive profit "one of the most critical measures" of the company's performance. He said he would continue to forego a cash salary and would seek to have his future compensation tied more closely to automotive profits instead of overall profits.

"I will also forgo any compensation -- at all -- until the compensation committee and I are satisfied that the company has achieved a sustaining profitability" in the automotive business, he said.

The company has eliminated management bonuses during other difficult periods, particularly when it is asking for sacrifices from shareholders, employees and suppliers.

Ford's 401(k) match had been 60 cents on the dollar, applied to the first 5% of an employee's salary set-aside in the retirement account. In recent years, Ford has suspended and restored the matching funds.

Ford has filed to sell Hertz Corp., the rental-car company it owns.

Ford's announcement did not mention the UAW. The union has worked with the Chrysler Group to limit health care inflation and is meeting with GM to save that automaker money.

"We have ongoing discussions with the union, which we do not share with the outside," Leclair said.

Although the company is lowering its outlook for the year, it now has higher expectations for the second quarter, which ends June 30.

Jim Padilla, Ford's president and chief operating officer, said the automaker simply must adapt to the difficult conditions in the industry. But he added that he is hopeful that new models such as the Ford Fusion sedan and the redesigned Explorer SUV will help.

"We're going at high-volume areas of the market with midsize cars, where we haven't been before. So I think that's an opportunity for us to grow share."

And...

Originally Posted by Detroit Free Press

Ford Motor cut its 2005 earnings forecast late on Tuesday for the second time in less than three months, blaming unexpectedly slack north American sales and problems with suppliers.

Detroit's second-biggest carmaker also announced several new austerity measures, including a 5 per cent cut in its north American salaried workforce and elimination of 2005 bonuses for managers around the world.

Ford said it would also trim purchases of outside services by one-tenth, and was investigating ways of cutting personnel costs outside north America. The company employs a total of 324,000 people worldwide.

Although Ford lifted its second quarter earnings targets, Don Leclair, chief financial officer, said that "challenges continue to mount, especially in our North America automotive operations".

Ford's US market share shrank to 19.1 per cent in the first five months of this year, from 20.1 per cent between January and May 2004. It has been hit especially hard by shrinking demand for its big and mid-size sport-utility vehicles, notably the Expedition and Explorer, which are among its most profitable products. Explorer sales have fallen by more than a quarter so far this year.

General Motors has stepped up the pressure on Ford in recent weeks with an "Employee Discount for Everyone" incentive programme. JD Power Associates estimated last week that GM's discounts boosted its market share by eight percentage points in the first 12 days of June, while pushing down Ford's share by more than a point.

Ford has responded by offering cash rewards of up to $1,000 to employees and pensioners who line up buyers of Ford vehicles.

Ford now expects that 2005 earnings will total between $1.8bn and $2.3bn, or $1-1.25 a share, before special items, down from its estimate on April 8 of $2.3bn-$2.8bn, or $1.25-$1.50 a share. Prior to April's profit warning, it projected a full-year profit of $1.75-$1.95 a share, equal to about $3.4bn.

One-time charges, including discontinued operations, are expected to reach about $147m, or eight cents a share.

The latest projection for second-quarter earnings is 30-35 cents a share, compared with the April 8 estimate of breakeven to 15 cents a share. The improvement is due chiefly to a lower tax rate assumption and stronger than expected earnings from the company's financing arm, Ford Credit.

Net income for the first quarter fell to $1.21bn, or 60 cents a share, from $1.91bn, or 94 cents, a year earlier. Ford Credit contributed $710m, or almost 60 per cent, of total first-quarter profits.

Tuesday's profit warning was issued after north American markets had closed. Ford shares rose by six cents during normal trading hours to $11.17.

[Marc]

Not much has changed in the last 3 years...

[Ajit Basrur]

Originally Posted by Marc

Not much has changed in the last 3 years...

Interesting observation Marc

Looks like Ford is not learning from their past mistakes and continue the same over and over again.