By Alan Katz and Bill Koenig
September 4, 2006
SourceSept. 4 (Bloomberg) -- Ford Motor Co. shares edged lower in Europe today after Chief Executive Officer Bill Ford said the company was ``in trouble'' in North America.
The stock dropped 6 cents from the close on Sept. 1 in New York to $8.21. Ford stock in the U.S. has fallen 12 percent over the past 12 months.
Ford, based in Dearborn, Michigan, will announce its third restructuring in five years this month. The second-biggest U.S. automaker announced in January it would cut 30,000 jobs and close 14 plants in North America by 2012. The CEO in an internal memo and again in an interview with Newsweek magazine yesterday said the company is working to accelerate that program.
``A turnaround is taking a very long time to materialize,'' said Yvan de la Fressange, who manages $181 million in the Gutzwiller One fund, including 250,000 Ford shares, in Basel, Switzerland. `` The actions they're taking now are the right ones and will probably work in the long term, but it's going to be a hard road.''
Credit-default swaps based on Ford Motor Credit's debt fell to $332,700 today from $333,700 on Sept. 1 and $418,600 a month ago. An increase signals perceptions of credit quality are deteriorating, a decrease indicates improvement.
Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on an increase or decrease in indebtedness. Investors who buy the contracts get $10 million should Ford default within five years.
The company didn't expect the speed and severity of the rise in oil prices, Ford said in the Newsweek interview posted on the magazine's Web site yesterday.
Oil Prices
``The rise in oil prices really shot Ford in the foot because it's caused demand for SUVs and trucks to plummet,'' de la Fressange said.
Ford has said this month's announcement is an acceleration of the January plan. The company has broadened restructuring beyond North America. Last week, Ford put its profitable U.K.-based Aston Martin luxury-car unit on the sales block. The automaker is debating the fate of its Jaguar and Land Rover luxury-vehicle subsidiaries. Land Rover became profitable in 2005 while Jaguar is losing money.
Bill Ford, great-grandson of company founder Henry Ford, became CEO in October 2001 and unveiled his first job-cutting plan in January 2002. Ford reported a $3.49 billion profit for 2004. Net income fell slid to $2 billion last year, as profits from car and truck loans made up for automotive losses. North America is the company's largest auto unit, where sales of profitable mid- and large-sized sport-utility vehicles fell.
Losses Continue
North American losses have continued in 2006 as fuel prices caused sales of F-Series pickup trucks to fall below company projections. Overall, the North American unit has been unprofitable for seven of the past eight quarters and Ford posted a $1.44 billion net loss for the first half of 2006.
The interview mirrored comments the CEO made in an e-mail to employees on Sept. 1, in which Ford said the company's business model is no longer enough to sustain profitability.
Ford has relied on profits from F-Series, the top-selling line of vehicles in the U.S., and SUVs. In his e-mail, Ford said the company ``must change to a new business model that requires greater bottom-line contributions from cars and crossovers.'' Crossovers are vehicles that blend the features of cars and trucks and typically travel further on a gallon of fuel than pickups and SUVs.
Ford last month announced it is cutting North American production of cars and trucks by 21 percent in the fourth quarter. The reduction will affect 10 plants overall, including four plants that produce F-Series pickup trucks.
Recruiting People
In the Newsweek interview, Ford also said he's willing to recruit people to fill jobs, including that of CEO.
Ford called Carlos Ghosn, CEO of Japan's Nissan Motor Co. and France's Renault SA, in July to discuss a partnership if Ghosn fails to form an alliance with General Motors Corp., three people familiar with the matter said last month.
Ghosn said he wouldn't talk to Ford until his talks with GM conclude, said the people, who didn't want to be identified because the conversation was private. Ghosn and GM Chief Executive Rick Wagoner are scheduled to present a preliminary report on a possible alliance to their respective directors by mid-October.
The July phone call marks at least the third time that Ford, 49, has approached Ghosn. In a news conference last year, he confirmed previously trying to recruit Ghosn and Dieter Zetsche now CEO of DaimlerChrysler AG.
To contact the reporters on this story: Alan Katz in Paris at
akatz5@bloomberg.net ; Bill Koenig in Southfield, Michigan
wkoenig@bloomberg.net .
Last Updated: September 4, 2006