Published January 30, 2009

Ford runs up US$5.9b Q4 loss

Carmaker cutting more jobs, will draw on available US$10.1b of credit

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(DETROIT) Ford Motor said yesterday it lost US$5.9 billion in the fourth quarter and burned through US$5.5 billion in cash as sales slumped, but the company still says it does not plan to seek federal loans.

After losing US$14.6 billion in 2008, the second-largest US carmaker said it was cutting more jobs and will borrow US$10.1 billion from an existing line of credit to help get it through what is expected to be a tough 2009.

The carmaker said it would draw on its available US$10.1 billion of credit due to the instability in capital markets and still expects to return to at least break even in 2011.

Chief executive Alan Mulally said on a conference call with reporters and industry analysts that the company plans further restructuring actions that will be announced later.

Ford said it substantially cut 1,300 white-collar jobs in a restructuring announced in November. Ford Motor Credit, the carmaker's finance unit, plans to cut 1,200 jobs, or 20 per cent of its staff, in 2009 and the United Auto Workers will end the jobs bank.

The jobs bank is a contract provision that paid nearly full wages and benefits to union-represented workers even after their jobs were eliminated.

'I think it's by far the most volatile period we've ever seen,' chief financial officer Lewis Booth told reporters. 'This is unprecedented. We're not seeing any signs of recovery yet.'

Still, Mr Booth said Ford was expecting some recovery in the US car market in the second half of the year and he expected it would be the first region to show signs of a rebound when the global recession ends.

The net loss widened to US$5.88 billion, or US$2.46 per share, in the fourth quarter, from US$3.06 billion, or US$1.13 per share, a year earlier. Ford reported a loss from continuing operations, excluding one-time items of US$3.27 billion, or US$1.37 per share. Analysts on average expected a loss of US$1.23 per share, according to Reuters Estimates.

Ford, which burned through US$7.7 billion in the third quarter, had automotive cash of US$13.4 billion at the end of the year and liquidity totalled US$24 billion. It expects to receive the funds from drawing on the US$10.1 billion line of credit on Feb 3.

Mr Booth said Ford was not drawing on the revolver to fund operations or maintain an adequate cash level, 'but because it's prudent to do in this financial market'. It also expects 2009 cash flow to be negative, but significantly better than in 2008, Mr Booth said.

Ford says it would like a US$9 billion line of credit from the US government as insurance against a worsening in the global economy and hopes to receive US$5 billion of direct loans from a programme to support improved fuel economy.

The UAW and Ford have not yet worked out when the jobs bank will end. Ford had about 1,500 workers in the programme at the end of 2008. Jobs banks are being eliminated at GM and Chrysler as well.

US car sales fell 18 per cent in 2008 and are expected to fall for a fourth consecutive year in 2009, ratcheting up pressure on carmakers in the world's most profitable market.

Ford remains more optimistic than most industry experts on US auto sales this year, setting a projected range of sales from 11.5 million to 12.5 million units including medium and heavy trucks.

Ford's US sales plunged 20.5 per cent in 2008, and its market share fell slightly to 15 per cent from 15.4 per cent in 2007. That uncertainty has spread to Europe as well, where sales have dropped. Markets such as South America, typically a bright spot for Ford, are also slowing.

The company's Asia-Pacific and Africa unit lost US$208 million in the quarter. Ford is still considering a sale of its Volvo unit, which lost US$736 million in Q4. -- Reuters, AP