Dearborn, Mich. Ford Motor Co.'s blue oval continued to bleed red ink in the third quarter, with the company posting a $5.8 billion loss Monday due to sagging North American sales and huge costs associated with a massive restructuring plan.
It was the largest quarterly loss in more than 14 years for the nation's second-biggest automaker, and company officials predicted things would get worse in the fourth quarter as market share drops and Ford pays for further plant closures to bring its manufacturing in line with lower demand for its products.
The July-September performance brings Ford's losses to $7.24 billion for the first nine months of the year, compared with a $1.87 billion profit for the same period last year.
The loss had some analysts worried that Ford could face a cash squeeze before it begins to realize savings from job cuts, plant closures and other aspects of its restructuring plan.
"It's going to take a while for those benefits to be evident in better earnings and cash flow," said Moody's Investors Service analyst Bruce Clark, who predicted that Ford would not see substantial savings until 2009.
Ford could be in dire shape if the economy slows or if there's a strike as the auto companies negotiate with the United Auto Workers union next year, Clark said. "It's going to be a very tough environment. They are going to have to deliver in a number of areas," Clark said.
Moody's said Ford's performance was consistent with expectations that led it to downgrade Ford's long-term rating to B3, six notches below investment grade, on Sept. 19.
Ford's new chief executive, Alan Mulally, called the latest results unacceptable, but said he was encouraged by Ford's progress in turning itself around.
"This is a critical time," said Mulally, a former Boeing Co. executive who grew up in Lawrence and graduated from Lawrence High School and Kansas University. He has been with the company a little more than a month. "We clearly recognize it and plan to deal with the business realities we are facing," he told reporters and industry analysts in a conference call Monday morning.
Also Monday, Ford said it plans to restate its earnings for 2001 due to accounting errors involving derivative transactions in its credit company. The restatement is expected to affect financial results from 2001 until the third quarter of this year. The company expected the restatement would improve results for 2002, but said other periods are under study.
Ford's net loss of $3.08 per share in the third quarter was larger than last year's third-quarter loss of $284 million, or 15 cents per share. Revenue fell 10 percent to $36.7 billion from the same period a year ago.
Excluding restructuring and other special charges, Ford said it lost $1.2 billion, or 62 cents per share, from continuing operations. Excluding special items in the third quarter of last year, Ford lost $191 million, or 10 cents per share.
Without the special items, Ford nearly met Wall Street expectations. Analysts surveyed by Thomson Financial had been expecting a loss of 61 cents per share for the quarter.
Ford shares fell 11 cents to close at $7.90 on the New York Stock Exchange, where they have traded in a 52-week range of $6.06 to $9.48.
Dearborn-based Ford's turnaround plan aims to cut $5 billion in costs by the end of 2008 by slashing 10,000 white-collar workers and offering buyouts to all of its 75,000 unionized employees.
Fitch Ratings sees little improvement in 2007.
"Stabilization of Ford's revenue performance in 2007 is unlikely, given production cutbacks, a slowing economy, enhanced competition in the critical pickup segment, and lack of new impact products," Fitch said in a note to investors.
But Mulally differed, saying he was encouraged by Ford's progress. "Clearly Ford has recognized the shift in consumer demand over the last couple of years. They really focus more on fuel-efficient, smaller vehicles. Not only in the autos but also the crossover vehicles," he said.