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Ford Posts $5.8-Billion Q3 Net Loss, $1.2-Billion Loss from Operations

23 October 2006

Fordq3
Pre-tax operations losses. Click to enlarge.

Ford Motor Company posted a third-quarter net loss of $5.8 billion, its largest since 1992. Excluding special items such as employee buyouts and the write down of the value of certain facilities ahead of plant closures, Ford posted a net loss from continuing operations of $1.2 billion, compared to a loss of $191 million in the third quarter of 2005.

Ford also said it will restate financial results from 2001 through the second quarter of 2006 to correct the accounting for certain derivative transactions.

These business results are clearly unacceptable. We are committed to dealing decisively with the fundamental business reality that customer demand is shifting to smaller, more efficient vehicles. Our focused priorities are to restructure aggressively to operate profitably at lower volumes, and to accelerate the development of new, more efficient vehicles that customers really want.

—Alan Mulally, Ford president and CEO

The performance from continuing operations primarily reflected ongoing challenges in the company’s North America, Asia Pacific and Africa, and Premier Automotive Group operations. Ford Credit and South American operations turned in a profit, and although Ford Europe lost money during the quarter, it showed a year-over-year improvement in operating results and is, according to Ford, on track to deliver full-year profitability.

On a pre-tax basis, worldwide Automotive sector losses in the third quarter were $1.8 billion. This compares with a pre-tax loss of $1.3 billion during the same period a year ago.

Worldwide automotive sales for the third quarter declined to $32.6 billion from $34.7 billion in the same period last year. Worldwide vehicle unit sales in the quarter were 1,511,000, down from 1,531,000 a year ago.

In the third quarter, Ford’s North America automotive operations reported a pre-tax loss of $2.0 billion, compared with a pre-tax loss of $1.2 billion a year ago. Ford attributed the decline largely to lower volumes and an unfavorable sales mix, primarily associated with lower industry volume and lower market share, and higher incentives. Sales were $15.4 billion, down from $18.2 billion for the same period a year ago.

Ford is reducing Q4 production in North America by 158,000 units from last year’s level of 635,000 units.

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October 23, 2006 in Fuel Efficiency, Sales, Vehicle Manufacturers | Permalink | Comments (16) | TrackBack (0)

Comments

With all the GM bashing on this site, I think many are losing sight of the fact that Ford is in much more serious trouble than GM, and could face bankruptcy first, while Daimler/Chrysler should be worrying next. But the right product can fix it all, for Ford.

Desperate times deserve desperate measures. Lets hope Alan Mulally can turn things around. And lets hope Ford designs some ground breaking, ultra efficient vehicle to turn its woes around, and to have a more versatile lineup. It may take a homerun here to do it for them. The days of the F-series truck paying the bills, and keeping them afloat, are behind them now. Other automakers should also take note.

Posted by: Mark A | October 23, 2006 at 08:33 AM

The American Big 3 are engineering giants. It's to bad costly contracts and narrow sighted products hurt a great company. The Escape, Taurus and Focus have been good to Ford. When the first Taurus came around it did wonders for Ford! The Focus is a great seller in Europe, and up till now the F-150 and up were big money items for them. Lets hope the Escape hybrid did get the Execs attention. When all 30,000 sell out quickly then you are on to something. I'd love a good diesel hybrid Compact/Midsize car aka Golf/Jetta. Listening Ford??

Posted by: Andy | October 23, 2006 at 08:48 AM

If I was a Ford creditor I might say lets just cut the losses now. Mazda has got to be worth around 20-30 billion. Volvo could be worth another 20. Then the core units of Ford without the contracts and debt.. eg.. the F-150 and higher line, the explorer line, and now the edge.. Those have to be worth a great deal.

Posted by: aa2 | October 23, 2006 at 10:33 AM

There were some people looking at Aston Martin. GM sold off GMAC and Suzuki. When the balloon is sinking, you throw ballast overboard. Just make sure the ballast is not people.

Posted by: SJC | October 23, 2006 at 10:52 AM

I would suggest it’s time for a bold move (how about a PHEV Escape). If they can’t do it themselves, they could outsource to Hymotion and get their fleet price of $5000 each. I would certainly pay that. Or, they should listen to some of the above suggestions.

If none of the above, they could always concentrate everything on “South America” and “Other Auto.”.

Posted by: George | October 23, 2006 at 10:58 AM

With all the GM bashing on this site...

When a post starts like that, you can safely ignore the rest.

Posted by: pizmo | October 23, 2006 at 11:17 AM

Quarterly loss means nothing if Ford is investing heavily into producing ground-breaking and highly competitive products or manufacturing processes. In fact, it is exactly this culture of short-sighted short-term profit minding that has lead Big Three and other industries into trouble. (ie. by rewarding current CEO's for posting strong short-term profit that is the fruit of long-term planning of their predecessors, who may have been demoted for investing into the future at the expense of maximizing short-term profit)

When making products that require long development time and complicated R&D process, it would be best to have a long-range outlook, realizing that the profit made today is the result of vision and planning made years if not decades ago. It is important to have deep-pocket cash reserve to survive lean times until the next harvest of technological development.

Posted by: Roger Pham | October 23, 2006 at 12:19 PM

> it would be best to have a long-range outlook...

Sure...they should have used a long range radar way before; but instead designed big, ugly, fuell consuming trucks, while the wind was changing.

They are in this trouble EXACTLY because of this lack of vision for future developments. I'm sorry for the people on the floor, but can have no mercy for the people in charge at Ford, who created such a mess, because of lack of insight and urge for quick - short term - profits. (Not in the last place for their own pockets, I assume...)

Posted by: J. | October 23, 2006 at 01:00 PM

With super-high wages and very little vision, the future looks very bleak for GM, Ford and Chrysler. Gone are the days we had no other choice but to buy their badly made gas guzzlers.

Car and truck making will have a tendency to go the same way as did most domestic and office electronics, small and large appliances, furniture, clothing and shoes, sport goods, flooring, tools, lawn mowers, etc....

One way that some of the Big Three local factories could survive another decade or more would be to:

1) design state of the art products that people want to buy.
2) eliminate low moving inefficient products.
3) import (like WalMart) all components and assemblies from countries with low cost labour.
4) reduce North American labour content to designers-engineers and the strict (non-specialized) minimum.
5) reduce local factory work force by up to 80% and adjust wages of the remaining few to the national industrial average.

Put UAW on a forced diet.

Posted by: Harvey D. | October 23, 2006 at 03:03 PM

The big three would be a lot better off if we had a healthcare system like the rest of the industrialized world. They take a big hit versus their overseas competition on that. J is exactly right regarding the lack of vision problem. Even if one of the big 3 had the vision to do the right thing, if the other two didn't do it, the one that did would probably get killed on Wall St. My last two cars have been Fords, the next will probably be Asian.

Posted by: George | October 23, 2006 at 06:37 PM

Well, one of us is an imposter!

I'll have to change my identity.

Posted by: George K | October 23, 2006 at 07:23 PM

I really hate to quote dubya but he said a while back "The american auto makers need to build something that is releavent".

That was the first and last time I have agreed with something this man has said in 6 years.

What should Ford do to turn it around?

1) Bring back the Ranger EV.

2) Replace the battery pack with the best Lithium pack they can buy.

3) Mount a small generator in the bed that runs on B100.

4) Sell it to all those people over at calcars.org that have promised to buy PHEVS as soon as someone builds them.

Posted by: KJD | October 23, 2006 at 08:13 PM

Pretty bad timing on losing the business...

As cars shift towards EVs & PHEVs... a big componant of these cars will be the battery... and the rest is electronics. lithium Ion seems to be the current bet.

But the US doesn't manufacture LiIons. Japan does.

So... who is going to be the leader in the cars of the future?

Time for the US Gov. to step in... offer a bunch of money to help create a viable battery manufacturing program. Something to compete with the imminant Japanese takeover of auto-manufacturing.

If we want to see clean / green tech to gain momentum here... it would behoove us to create the jobs making these green pieces of the future economy right here in the US.

Could GE buy / partner with Ford & start making cars?

Posted by: Matt | October 23, 2006 at 08:19 PM

Ford got caught with inventory they cannot sell due to shifting market forces. One solution is to design more fuel efficient models and build to tight order - the way the PC industry does.

That way, when fickle buyers change their minds the inventory will be minimal. Build to order assembly requires significant investment but enables the manufacturer to shift product lines quickly.

Of course, American infatuation with big vehicles is one culprit. Infatuation subsidized by big oil gasoline.

Posted by: gr | October 23, 2006 at 09:15 PM

Pizmo, any chance you want to discuss the GM bashing? You are pretty good at saying we should be ignored, but so far you got no answer on the substance. Cat got your tongue?

And Michael M, if you allow his posts you should allow this one. And, if this site is going to become a forum for labor relations issues too, as in some of the posts you let through, then you should be ready to host a vigorous debate on those issues.

Posted by: factoryrat | October 24, 2006 at 02:53 PM

Matt, u r absolutely on the right track.
It's time for the US Gov. to step in to save US manufacturing base from the onslaught of foreign competition. It's should be like another Sputnik, or Appollo program, or WWII-type of intervention. The US manufacturing base is like the Titanic after it has hit the iceberg, and the captain was still asleep and no one dared to interrupt the parties that were going on!

The Big Oil don't need help. It's the dying manufacturing sector that should be helped, but has not the kind of cash to donate to the GOP's PAC's coffer!!

Posted by: Roger Pham | October 24, 2006 at 08:39 PM

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