Ford Motor Co. is slowly recovering from the aftermath of the market shift toward small, fuel-efficient cars. In the recent quarterly sales report presented by the company, it was reflected that Ford’s losses were reduced. That fact is a stoplight that the Detroit automaker has a long way to go, as Ford CEO Alan Mulally noted.
Reduced net loss
Previously, critics anticipating more bad news were surprised by Ford Motor Company’s better-than-expected net loss of $ 282 million. The figure far exceeded Wall Street expectations and caused a slight rally in the company’s shares. The figure also reflected Ford’s return to profitability. “Although our first quarter results are encouraging, we still have a long way to go,” Mulally said during a conference call. But “the basics of our business are improving.”
The automaker’s loss during the first quarter of this year was a huge improvement compared to the $ 1.4 billion the company lost in the same period last year. Still, Ford’s key North American business underperformed the previous year. The reason behind this is the continued loss of market share.
Simply put, Ford’s sales increased worldwide, but fell in North America, where the loss rose to $ 614 million compared to $ 442 million in 2006. Despite that, the figure was more than $ 500. million better than the company expected. This information was provided by Ford Americas President Mark Fields.
Ford Credit, which according to Mulally remains a vital part of the business, remained lucrative, yet saw earnings decline from $ 248 million to $ 193 million. Across the Atlantic, the Ford of Europe reported a net profit of $ 219 million, which is an increase from $ 65 million the previous year. Premier Automotive Group, made up of the Aston Martin, Jaguar, Land Rover and Volvo brands, posted the best results in its history. Ford’s ignition to recover is compared to the power of a Volvo distributor cap.
Where the plan is heading
According to industry analysts, these numbers are the first clear indicators of where Mulally’s turnaround campaign is headed. When Mulally, the former Boeing chief executive, was hired by Ford in September, he told his board of directors that it was too late to make a big impact on 2006 results. He added that they should start judging him by the January results.
While the numbers have clearly improved, some analysts cautioned against reading too much about them. “Ford recognizes that, like last year, the first quarter will be its strongest quarter,” said Shelly Lombard of Gimme Credit. “We still believe that management is doing all the right things, Ford’s liquidity should be enough to get through this recovery period, and even in a bankruptcy scenario, the bonds are probably worth it. But this is a marathon, not a sprint. And there is more pain to come. “
Ford executives said they also don’t expect first-quarter results to hold up for the full year. “We are facing significant headwinds for the remainder of the year,” said Chief Financial Officer Don Leclair. He noted unfavorable currency exchange rates, rising materials costs, and poor performance in the domestic housing sector that historically translates into declining demand for pickup trucks.
Plan transition
But Mulally said the company hopes to meet its restructuring targets. “This transition is not just about the Blue Oval in North America. It is about all of our operations around the world and all of our brands,” added Mulally. “What they saw today was that the plan was working. North America not only beat their plan, they all did.”
Mulally delivered the positive news to employees at a “town hall” meeting at the automaker’s Dearborn headquarters, during which he praised them for their hard work and reiterated Ford’s commitment to return to profitability by 2009. .
To reduce operating costs of $ 5 billion
To overcome losses like the monster $ 12.7 billion it posted for 2006, Ford has to cut $ 5 billion in operating costs by the end of 2008. The CEO said the company is on track to do so, thanks in large part. part to the success of your early retirement and voluntary purchase programs.
Ford has already cut a total of 11,900 employee jobs in North America since the end of 2005. In addition, it expects another 2,100 jobs to leave by the end of 2007. About 16,500 hourly workers have also left the automaker’s factories in North America since late 2005, and the company expects as many as 14,200 more to leave by the end of 2008. This is regardless of the fact that 2,000 blue-collar workers who have signed up for acquisitions changed their minds in the past three months.
Additionally, 5,000 hourly workers employed in the former Visteon Corp. factories have left the company. The automaker also hinted at its plan to sell or close them all by the end of 2008, but the company said Thursday that one or two plants could stay open a bit longer to ensure a continuous flow of production.
More plant closures expected
As part of its plan to close 16 plants by the end of 2012, Ford also plans to idle nine factories in the United States and Canada by the end of 2008, some of which have already closed. Taken together, these moves are expected to translate into a 26 percent decrease in the company’s production capacity in North America.
However, Ford raised its North American production plan for the second quarter to 810,000 vehicles from the 770,000 it had previously forecast. He said the move was necessary to boost inventories and was not expected to change full-year production volumes.