Ford Motor Narrows Third-Quarter Loss to $380 Million

Nov. 8 -- Ford Motor Co., the second-biggest U.S. automaker, narrowed its third-quarter loss to $380 million after boosting revenue and reducing costs through plant closings and job cuts.

The loss decreased to 19 cents a share from $5.2 billion, or $2.79, a year earlier, Dearborn, Michigan-based Ford said in a statement today. Revenue climbed 11 percent on a 1.4 percent advance in unit sales. Gains in China helped make up for a plunge in U.S. volume. The automaker indicated that it has decided not to sell its Volvo unit. The shares rose.

The results put Ford ``on track'' for a return to profit in 2009, Chief Executive Officer Alan Mulally said. For the second straight quarter, the automaker topped analysts' estimates by a wide margin. Three months ago, Ford surprised investors with a $750 million profit, its first in two years.

``It looks good; they beat estimates, they beat on the revenue side,'' said Mirko Mikelic, who helps manage $21 billion in fixed-income assets at Fifth Third Asset Management in Grand Rapids, Michigan. ``Those are pretty solid numbers.''

Excluding costs the company considers one-time items, the loss was $24 million, or 1 cent a share. On that basis, analysts expected a loss of 47 cents, the average of 14 estimates compiled by Bloomberg.

Ford gained 28 cents, or 3.4 percent, to $8.52 at 9:42 a.m. in New York Stock Exchange trading. Ford rose 9.7 percent this year through yesterday.

``We can see our plan taking hold with significant improvement continuing in our core automotive operations,'' Mulally said in the statement.

Volvo: Not for Sale

Ford said it completed a review of its Sweden-based Volvo unit and that Volvo will ``operate on a more stand-alone basis.'' Ford will report Volvo's financial results beginning next year.

``The new news is that we've decided not to sell it,'' Mulally said in an interview on WJR-AM radio in Detroit. Spokeswoman Becky Sanch declined to comment beyond the statement.

The automaker also said it expects to have an agreement to sell its U.K.-based Jaguar and Land Rover units by early 2008.

Ford said its revenue increase, to $41.1 billion, stemmed from higher overall prices and selling more-expensive versions of models. The weakening U.S. dollar reduced pretax profits by roughly $300 million, Chief Financial Officer Don Leclair said on a conference call.

U.S. Loss, China Gain

Ford sold 1.49 million vehicles in the quarter, including a 27 percent sales gain in China. Sales in the U.S., Ford's biggest market, dropped 18 percent to 600,310, according to figures from Autodata Corp. of Woodcliff Lake, New Jersey.

The company said its worldwide automotive business had a pretax $362 million loss, down from $1.9 billion a year earlier. The North American auto unit, the main source of losses, had a $1 billion pretax deficit, about half of what it was in 2006's third quarter. The figures exclude costs Ford considers one-time items.

The Ford Motor Credit lending unit reported net income of $334 million, 26 percent below the third quarter of 2006, due in part to an increase in borrowing costs and larger depreciation expenses.

Mulally is closing 10 plants and has cut thousands of jobs in an attempt to restore profitability after a $12.6 billion loss in 2006. He also has hired a new sales chief from Japan's Toyota Motor Corp. to shore up Ford's shrinking U.S. market share.

Ford has cut 33,600 U.S. factory jobs since the end of 2005, the company said in a slide deck prepared for a conference call about earnings.

Plant Closings

Earlier this year, the automaker trimmed 10,000 salaried jobs and closed two assembly plants, in Michigan and Virginia. Last year, Ford shut its St. Louis and Atlanta factories.

``Ford has another $2.7 billion of cost cuts in North America during 2008,'' Peter Nesvold, a New York-based analyst for Bear Stearns & Co., said in a note. ``Even into a highly challenging environment next year, this should support continued year-over-year earnings improvement.''

Ford derives about 38 percent of U.S. sales from big pickups and sport-utility vehicles, models most affected by rising gasoline prices. A U.S. housing slump also has curbed spending and kept away some truck buyers such as contractors. Ford is deliberately reducing some sales by scaling back low- profit deals with rental-car companies.

U.S. Market Share

The automaker hasn't reported a gain in domestic market share since 1995, when it accounted for one in every four cars and light trucks sold in the U.S.

The U.S. market share of the company's Ford, Lincoln and Mercury brands fell below the automaker's target of at least 14 percent. Mark Fields, chief of Ford's Americas unit, told reporters Nov. 5 that the company is stabilizing sales to individual customers.

Ford last month hired Jim Farley, one of Toyota's top U.S. marketing officials, to lead global marketing, ending Mulally's search for an executive to raise consumer awareness of Ford products. Farley will also directly supervise Ford's U.S. sales and marketing efforts.

Ford's 7.45 percent note due July 2031 dropped 0.19 cent to 77.4 cents on the dollar, yielding 9.94 percent, according to Trace, the NASD's bond-price reporting service.

Credit-default swaps tied to Ford bonds gained 68 basis points to 720 basis points yesterday, according to CMA Datavision in New York. An increase signals declining investor confidence in the company's ability to pay back its debt.