Ford Motor Co. did better than expected financially during the fourth quarter, eking out a small profit even though its core automotive business was under siege and its credit rating under extreme pressure.
William Clay Ford Jr., chairman and chief executive officer, said Ford Motor was profitable for the third consecutive year in 2005 and its automotive business was profitable everywhere but in the United States. “We accomplished many things in 2005, including the successful launch of the new Ford Fusion, Mercury Milan, and Lincoln Zephyr, introduction of the company’s new innovation initiative, completion of the sale of Hertz, and an agreement with the UAW to help reduce rising healthcare costs,” said Ford.
“Excluding North America, our automotive operations made great progress in 2005. We must keep working to improve our business in each and every region,” Ford added.
John Murphy, the auto analyst at Merrill Lynch, said in a note to clients that Ford’s fourth quarter was better than expected. “Surprisingly, the main driver of the upside of the quarter was Ford’s automotive operations,” he said. In addition, the company’s liquidity position looks relatively secure since the company is now sitting on $25.1 billion in cash, Murphy said.
Running the numbers
Overall, Ford Motor posted net income of $124 million, or eight cents per share, compared with fourth quarter net income of $104 million, or six cents per share, in 2004. Excluding special items, fourth quarter after-tax income from continuing operations totaled $511 million, or 26 cents per share, compared to $554 million, or 28 cents per share, a year ago, while sales and revenue in the fourth quarter were $47.6 billion, compared to $44.9 billion in the year-ago period, the company reported.
For the full year, Ford’s net income dropped 43 percent to $2 billion, or $1.04 per share, compared to 2004 when the company reported net income of $3.5 billion, or $1.73 per share.
Excluding special items, Ford’s 2005 full-year after-tax income from continuing operations totaled $2.5 billion, or $1.28 per share, compared with year-ago earnings from continuing operations of $4.3 billion, or $2.11 per share, excluding special items.
Full-year sales and revenue for 2005 was $178.1 billion, up from $171.7 billion a year ago.
Don Leclair noted Ford had eliminated more than 10,000 employees from automotive-related jobs in an effort to cut personnel costs.
Nevertheless, Ford’s worldwide automotive sector reported a pre-tax loss of $1 billion for 2005 compared with pre-tax profit of $850 million a year ago. The decline primarily reflected unfavorable cost performance, volume and mix, and exchange, partially offset by net pricing, Leclair said. In the fourth quarter, the automotive sector managed a pre-tax loss of $12 million, an improvement of $458 million from a pre-tax loss of $470 million a year earlier.
The company’s profits would have evaporated had it not been for the strong showing of Ford Motor Credit, which reported net income of $2.5 billion in 2005, down $370 million from a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $3.9 billion in 2005. In the fourth quarter of 2005, Ford Motor Credit’s net income was $465 million.
Ford’s problems in the automotive businesses were centered in North America where Ford reported a 2005 full-year pre-tax loss of $1.6 billion, compared to a pre-tax profit of $3 billion a year ago. For the fourth quarter, North America automotive operations reported a pre-tax loss of $143 million, compared to a pre-tax loss of $470 million in 2004. Ford’s fourth-quarter sales were $22.1 billion, compared with $21.1 billion in 2004.