January 24, 2008 / 12:47 PM / 10 years ago

UPDATE 4-Ford 4th-quarter loss narrows; forecasts 2008 loss

(Adds details on buyout packages, updates share price)

By Jui Chakravorty Das and David Bailey

DETROIT, Jan 24 (Reuters) - Ford Motor Co F.N posted a sharply narrower fourth-quarter loss on Thursday after cutting costs but forecast a net loss for the full year 2008 amid fears of a weakening U.S. economy.

The nation’s No. 3 automaker, which has struggled with declining sales and sliding market share in the United States, said it would take further cost-cutting actions on its home turf, including offering buyouts to all of its unionized workers.

Ford was surpassed by Japanese rival Toyota Motor Corp 7203.T as the second-largest automaker in the United States last year as it grappled with a slowing economy, a slumping housing market and tighter credit markets that pinched less credit-worthy borrowers.

Ford reported a fourth-quarter net loss of $2.75 billion, or $1.30 per share, compared with a loss of $5.63 billion, or $2.98 per share, a year earlier.

The loss from continuing operations, excluding one-time items, was 20 cents a share. On that basis, analysts expected a loss of 19 cents a share, according to Reuters Estimates.

Ford shares were down 12 cents, or nearly 2 percent, to $6.15 in midday trade on the New York Stock Exchange.

“With macro uncertainty dominating, we expect little about (the fourth quarter) to change investor views on either the near-term prospects or the longer-term turnaround,” Lehman Brothers analyst Brian Johnson said in a research note.

U.S. auto sales fell for the second consecutive year in 2007, and the consensus view among Wall Street analysts and high-profile investors points to a further decline this year.

“Concerns about a weaker U.S. economy are well-founded, but we believe that Ford is relatively well-positioned to weather a slowdown,” Calyon Securities analyst Mark Warnsman said.

“A prolonged, outright recession would be significantly more challenging,” he added.

Ford’s fourth-quarter revenue came in at $44.1 billion, up from $40.3 billion a year earlier.

“Although our automotive operations are improving on a year-over-year basis, the U.S. economy is slowing and the outlook for the auto industry remains challenging,” Ford Chief Executive Alan Mulally said in a statement.

The fourth-quarter results included a series of one-time items, including a $2.4 billion pretax write-down of assets for the company’s Sweden-based Volvo car unit.

The results also included a $1.37 billion pretax cost related to accounting for incentives to dealers. The move reduced Ford’s quarterly revenue. Without the change, revenue would have been $45.5 billion.

LABOR COST CUTS

Ford had been expected to announce buyouts as part of a labor contract reached late last year, but the automaker had not provided any details until Thursday.

Analysts have hailed the contract for its potential to slash the company’s labor costs by allowing it to hire new workers at half the wage rate of current employees. The pact also shifts retiree health-care obligations to a new trust fund.

Mulally said on a conference call with analysts and reporters that Ford was offering buyouts to all 54,000 of its employees represented by the United Auto Workers union. He said the buyouts would be offered in two stages -- one that runs from now through the end of February, and another that starts on Feb. 18 and runs through March 17.

He said most workers who accept buyouts would leave the company in the second quarter. He gave no details on how many workers Ford aims to trim through the buyouts.

The buyout packages will mirror those offered toward the end of 2006, but one will be more generous.

A package that offered retirement-eligible workers a $35,000 lump-sum incentive in 2006 will now offer a $50,000 lump-sum incentive for “non-skilled” employees and a $70,000 lump-sum incentive for “skilled” employees.

Ford has about 12,000 U.S. factory workers eligible for retirement, Mulally said on the call.

Ford cut its work force by 32,800 employees in 2007 in an effort to bring production in line with demand in the crucial North American market.

Ford posted a pre-tax loss of $1.6 billion in that market in the fourth quarter, compared with a loss of $2.7 billion a year earlier. The improvement reflected higher margins on vehicles as the automaker pulled away from cut-rate sales to car rental companies and held back from offering large consumer incentives.

Ford’s finance arm, Ford Motor Credit, said net income dropped 33 percent to $186 million in the fourth quarter. The unit reported net income of $775 million for 2007 and said it expects about the same results in 2008.

“Guidance for this unit called for flat 2008 profits, suggesting management expects higher credit costs to likely be offset by cost savings,” JP Morgan analyst Himanshu Patel said. (Reporting by Jui Chakravorty Das and David Bailey; editing by John Wallace)

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