Ford's profit jumps 38% Strong 4th quarter attributed to SUV sales and cost-cutting

Auto industry

January 28, 1998|By BLOOMBERG NEWS

DEARBORN, Mich. -- Ford Motor Co.'s fourth-quarter earnings rose 38 percent on strong sales of high-profit sport utility vehicles and on cost-cutting that improved performance worldwide.

Ford's earnings climbed to $1.80 billion, or $1.45 a diluted share, from $1.3 billion, or $1.10 a diluted share, before a gain and a charge in the year-ago period, the company said yesterday. The earnings topped the $1.28-a-share average analyst estimate in a First Call survey.

The higher profit reflects the beginnings of major cost cuts that Ford promised three years ago with a global reorganization. It also stems from a decision to let lagging car models such as the Thunderbird motor fade into history as Ford focuses on higher-profit trucks. Ford noted that its profits contributed to the highest quarterly earnings period ever for U.S. automakers.

Ford shares rose $1.625 to $49.875 on the New York Stock Exchange yesterday.

"North America produced very solid results on the back of a very rich product mix and an awful lot of cost-cutting; in Europe, it was a really phenomenal cost-cutting story," said Nicholas Lobaccaro, a Merrill Lynch auto analyst. Earnings also were boosted by about 15 cents a share because of changes in Ford's pension plan assumptions and because the company built about 33,000 more vehicles than expected, Lobaccaro said.

Ford's 160,000 U.S. hourly and salaried workers will receive profit-sharing checks for $4,400, up from $1,800 last year.

Revenue rose 3.1 percent to $40 billion from $38.8 billion.

Ford's profit from its worldwide auto operations more than tripled to $1.34 billion from $390 million in the year-ago period. Automotive costs for the year fell 0.4 percent, to $116 billion, and Ford cut its worldwide costs by $3 billion, or three times its original target.

In North America, Ford benefited by per-unit pretax profits of as much as $10,000 on each Explorer and Navigator sport utility. North American profit doubled to $1.35 billion from $653 million in the year-ago period.

The company cut slow-selling car models such as the Thunderbird and the Probe, and stopped discounting Taurus sales to win bragging rights as the top-selling U.S. car.

Trucks, including the still-popular Explorer sport utility, accounted for 58.5 percent of Ford's U.S. sales in 1997, up from 57.4 percent in 1996.

The impact of Ford's cost discipline was most apparent in Europe, where it cut slow-selling models and closed unneeded assembly lines. Even though its 1997 European market share slipped, Ford earned $158 million in the region, compared with a loss of $88 million in the year-ago quarter. It will be tough to repeat the full-year profit of $273 million in Europe this year, Ford told reporters.

Ford ended the year with a record $20.8 billion in cash and marketable securities, up from $15.4 billion at the end of 1996. Analysts expect Ford to use its cash to buy more shares, after it completes the spinoff of Associates First Capital Corp., its consumer finance unit, sometime in the spring. Ford's financial services group earned $455 million in the fourth quarter, down from profit from operations of $610 million in the year-ago period. The decline reflects higher reserves to pay for the depreciated value of vehicles its customers are now leasing, and higher credit losses, Ford said.

Pub Date: 1/28/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.