Embattled US automaker Ford Motor Co. warned of tough times ahead as it reported heavy financial losses and plans to slash an additional 10 percent from its salaried North American worker costs.
“We now believe the global economic and industry slowdown will now be broader, deeper and longer than previously expected,” Ford president and chief executive Alan Mulally said in a conference call.
“The global automotive industry is facing unprecedented challenges. The turbulence in the worldwide economy continues to undermine consumer confidence and our business, as does the tight credit market.”
Mulally said he expects demand to weaken further in 2009 before recovering in 2010.
He said Ford will continue to trim costs and production in response to weakening demand, although it does not currently have plans to close additional factories.
Ford was able to narrow its net third-quarter loss to 129 million dollars from 380 million dollars in the third quarter of 2007 through major cost-cutting measures, including wiping two billion dollars in health care costs from its books as a result of a recent labor agreement, the number-two US automaker said in a statement.
But its revenues fell by nearly 10 billion dollars to 41.1 billion in the third quarter as sales plummeted.
The company burned through 7.7 billion dollars in cash to keep its operations going in the third quarter and said it was looking for new sources of financing to help maintain its operations.
It now has just 18.9 billion dollars remaining in its cash reserves and access to a line of credit of 10.7 billion.
The company is taking a number of actions to “ensure that we achieve the minimum cash balances to keep the business running,” said chief financial officer Lewis Booth
It has already swapped about a billion dollars of equity for debt and its financial arm, Ford Credit, has sold four billion dollars of asset back securities through a federal plan to ease the credit crunch.
Mulally and other auto industry executives met with Congressional leaders in Washington Thursday to discuss obtaining more government loan guarantees.
“Clearly the economy could degrade much faster and put the industry at risk so one of the things we talked about was having a bridge-loan capacity to access,” Mullaly said.
Shares in Ford fell 2.02 percent to 2.02 dollars.
Ford said it is on track to cut its annual operating costs by five billion dollars and has slashed its North American workforce from 122,000 in 2006 to 80,000 in the third quarter of 2008.
The company said it would take a series of additional actions to reduce costs and shore up the company's finances to combat “the continued weakness in the global automotive market and economic environment.”
In addition to the workforce cost cuts, to be completed by the end of January 2009, the company said it would reduce capital spending on engineering and product development and on advertising, as well as reduce inventories globally.
Ford reiterated its continued investment in the smaller, more fuel-efficient products, saying that nearly all planned product programs remain “on track and on time.”
“We continue to take fast and decisive action implementing our plan and responding to the rapidly changing business environment,” Mulally said in the statement.
“We have a strategy that is broad and specific enough to handle the dramatic changes in today's environment. We will continue to assess the rapidly changing business environment and modify implementation of our plan accordingly.”
Ford's pre-tax operating loss, on a constant basis, was 2.7 billion dollars. A year ago, the company had operating profit of 194 million dollars.
Per share, the quarterly loss was six cents But excluding exceptional items the loss per share was 1.31 dollars, far sharper than the 93 cents expected by most analysts.
