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http://www.freep.com/money/autonews/ford17_20030417.htm
http://www.freep.com/money/business/walsh17_20030417.htm
Cuts help boost Ford profits to $896 million

1st quarter is twice as high as projections
April 17, 2003

BY JAMIE BUTTERS
FREE PRESS BUSINESS WRITER

Ford Motor Co. on Wednesday posted a quarterly profit for only the second time in two years, and it was a doozy.

Ford more than doubled Wall Street's expectations for first-quarter profits, and investors snapped up Ford stock, pushing the share price up more than 10 percent.

Ford earned almost $900 million, reversing a loss of $1.1 billion for the same months last year. The average first-quarter prediction had been a profit of just under $400 million.

Two main factors propelled Ford to its best quarter in two years: steep cost-cutting and strong pricing.

While rival General Motors Corp., which has led the market's use of no-interest loans, saw the net price people pay for its vehicles fall by 3.2 percent in the first quarter, Ford's pricing was up 0.2 percent in the United States.

The two companies may not use exactly the same calculations, but "the contrast remains stark," said Gary Lapidus of the brokerage Goldman Sachs. He upgraded Ford stock to the equivalent of "hold" and downgraded GM to the equivalent of "sell."

On the cost-cutting front, Ford had set a target of saving at least $500 million in its automotive operations over the year, but it has already saved $638 million.

While investors were pleasantly surprised by Ford's progress, it wasn't unforeseen. Last week, Scott Sprinzen, who studies the auto industry for leading credit-rating agency Standard & Poor's Corp., said that the cost-cutting at Ford reminded him of the early days of the Chrysler Group turnaround two years ago.

Investors were also cheered by two other key details: Ford is sticking by its full-year profit goal of $1.25 billion, and it made money in both its banking and automaking businesses.

In its 100th year, the Dearborn-based automaker is under pressure to stop losing money from the manufacturing of cars and trucks. S&P has warned that Ford -- whose credit rating is only two notches north of "junk" status -- would likely be downgraded if it failed to at least break even on its worldwide automotive operations this year.

So far, so good. Ford posted a pretax profit of $659 million from its automotive operations in the first quarter, reversing last year's first-quarter loss of $370 million before taxes.

Ford's North American business, consisting of the traditional Ford, Lincoln and Mercury brands, earned $1.2 billion before taxes, more than doubling last year's first-quarter pretax profit of $465 million.

Losses from international automotive operations, which includes Ford's Premier Automotive Group of European luxury brands, shrank to $353 million in the quarter, down from $469 million in the first three months of last year.

None of the international operations reported a profit in the first quarter, due in part to changes in reporting practices.

Ford Credit posted a net profit of $442 million for the quarter, up from the $256 million earned in the same period last year.

Ford also stuck by its profit outlook for the year: $1.25 billion, or 70 cents a share.

"We feel pretty good about it," said Allan Gilmour, Ford's vice chairman and chief financial officer.

Shares of rival GM fell 2.6 percent Tuesday, after the world's largest automaker beat first-quarter expectations. But GM warned it might not reach its $5-per-share, or $2.8 billion, target for 2003 operating profits.

Ford said it expects to earn 10 cents a share, or $180 million, in the second quarter.

After the strong start to the year, some analysts are looking for more upside surprises.

"Its full-year outlook . . . is either a low-ball estimate or Ford expects a much weaker industry," wrote Merrill Lynch analyst John Casesa. "We think . . . that expectations may be too low."

[ 04-17-2003, 12:46 PM: Message edited by: drivefaster ]
 

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Originally posted by ZX3_Phocus:
what did they cut? does this have to do with the mass layoffs?
<font size="2" face="Verdana, Arial">they cut costs.

The perk of not redesigning your cars is that they become cheaper to build over time.
 

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Originally posted by ZX3_Phocus:
what did they cut? does this have to do with the mass layoffs?
<font size="2" face="Verdana, Arial">I don't recall Ford having any mass layoffs. But there were layoffs about 6 months ago.

It seems more interesting that just last month people were talking about Ford and bankruptcy.
 
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