Ford lost $5.5 billion in 2001
Execs won't say when next profit is
expected; analysts frustrated
January 18, 2002
BY JAMIE BUTTERS
DETROIT FREE PRESS BUSINESS WRITER
Ford Motor Co. reported its worst financial
performance since 1992 on Thursday, booking a
widely expected, though still enormous, loss of $5.5
billion for 2001. The automaker lost almost $800
million on day-to-day operations and more than
$4.6 billion trying to fix past mistakes.
Expensive plant closings, bad bets on precious
metals and the replacement of millions of potentially
faulty tires produced the loss, an extreme about-face
from the Dearborn automaker's profits of $3.5
billion in 2000. The company expects to break even
Most of the damage was done in the final three
months of 2001, when Ford lost $860 million on
regular business and took a $4.1-billion charge as
part of a sweeping plan that includes closing at least
five plants and eliminating 35,000 jobs worldwide
over several years. Another $102-million charge to
account for some financial investments brought the
fourth-quarter loss to $5.1 billion.
That was the worst three-month result since the first
quarter of 1992, when an accounting change
produced a loss on paper of $6.7 billion.
That year was also the last time that Ford lost
money on a calendar-year basis: $7.4 billion. Aside
from onetime items that year, Ford lost only about
Total revenues in 2001 were $162.4 billion, down 5
percent from $170.1 billion in 2000. Revenues at
rival General Motors Corp. were down 3 percent.
The dismal results reported Thursday were not a
surprise. Ford's top executives detailed what they
called their revitalization plan -- including the
onetime charges -- to Wall Street experts,
journalists and employees last Friday.
The outlook for this year is more uncertain.
The plan is to break even this year, after losing
money in the first quarter, Chief Financial Officer
Martin Inglis said Thursday.
Earlier in the week, analysts were projecting Ford to
earn 29 cents a share -- about $500 million -- for
Inglis declined to give any further guidance, such as
when the company would turn a profit again, which
frustrates some analysts.
Companies typically promise a specific level of
performance each quarter, but Ford has not done
so, even in presenting its turnaround plan.
"The whole plan is very flaky," said Saul Rubin of
UBS Warburg. "There's no guidance for Ford
Credit. There's no guidance for North America.
There's no guidance for Ford of Europe. There's
just no guidance."
Analyst John Casesa of Merrill Lynch, who calls
the turnaround plan "comprehensive and credible,"
lowered his 2002 outlook for Ford this week from a
profit of $500 million to a loss of $350 million.
Rubin noted that the quarterly results did have one
piece of unexpected good news: Ford improved its
cash position in the fourth quarter by about $800
That should help reduce the likelihood of further
credit-ratings cuts, at least for the time being.
Further bolstering the company's balance sheet are
attempts to sell three non-essential businesses,
including a chain of junkyards, for $1 billion and an
effort to raise $3 billion selling new securities.
Inglis is in New York this week on a so-called road
show to explain the risks, opportunities and
mechanics of the company's new securities to Wall
The new securities act like preferred stock or a
bond -- regular dividends, but no vote -- except that
they can be exchanged for common stock any time
Ford wouldn't have needed to spend the time and
money on this offering if it had retained more of the
cash it had in hand just a few years ago.
Ford gave its shareholders the equivalent of $47
billion over the last five years through regular and
special dividends, spinoffs and stock buybacks.
Inglis said the current offering is an efficient way to
raise funds, but he acknowledged that in retrospect
it would have been better to keep more cash "if we
had recognized the amount of issues we had within
But giving money to shareholders was the least of
Ford's worries this year.
It made a $1-billion mistake buying a large amount
of palladium -- a precious metal used in catalytic
converters -- when prices peaked above $1,000 an
ounce. Soon afterward, the company cut its reliance
on the material, and its price plunged to about $400
Closing five plants will cost the company about $3
billion in accelerated depreciation. The company
never needed as many plants as it had in North
America, Chief Operating Officer Nick Scheele has
said. Why did it have so many plants? "I have no
idea," he said this week.
Profits at financing arm Ford Credit fell by 22
percent to $1.2 billion for the year. The fall was due
to the company setting aside more money to cover
loans that go bad when customers default or file
Contact JAMIE BUTTERS at 313-222-8775 or