Posted on Tuesday, February 27, 2007 - 01:25 pm:

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quote:

Burdened by big European losses and billions of dollars in U.S. health care costs, Ford Motor Co. on Wednesday reported the largest annual loss in American corporate history, even though its production lines are the most efficient of Detroit's Big Three.
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Last year's loss of $7.4 billion by the nation's No. 2 automaker will stand as a record for only one day. On Thursday, General Motors Corp. is due to announce a much larger loss, of about $23 billion, composed almost entirely of a $20-billion charge for the future medical costs of its retired workers as part of a nationwide revision of accounting standards applying to all U.S. corporations.
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This blizzard of bookkeeping losses has hit the auto companies harder than many others because over the years they have negotiated extremely liberal health benefit packages for workers in place of pay increases, but did not accompany them with any method of controlling medical costs - a national and not just a corporate problem that is finally forcing government reform of the private U.S. health insurance system.
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Ford says its employee medical costs of about $800 a car are well below the industry average of about $1,000, but they still cost the company more than its bill for steel.
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Ford had to take a one-time retiree health care charge of $7.5 billion under the new Financial Standards Advisory Board Rule No. 106. It also gained $657 million from a new accounting for income taxes. Even after these adjustments, its worldwide automotive operations lost $1.5 billion, an improvement of $1.7 billion from a loss of $3.2 billion in 1991. But this was hardly anything to boast about when revenues jumped from $88 billion to $100 billion in one year and the most consistently profitable part of the business was its financial services division.
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U.S. operations lost $405 million despite an 8 percent rise in U.S. factory sales. This was boosted by Ford's Taurus overtaking Japan's Honda Accord as the best-selling car in America, assisted by consumer rebates averaging $1,030 a car for all Ford models and up to $3,500 for leases on the Taurus.
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"How could they increase factory sales throughout the year and still lose so much money? They still haven't figured out how to make money selling cars in the United States," said Maryann Keller, an auto industry analyst with Furman Selz.
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She said the company spent about $5 billion designing and launching the new Mondeo, which debuts in Europe next month, as a belated successor to the mid-range Sierra, and remodeling its Escort and Fiesta.
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"And they boasted about it," she said, noting that Chrysler spent only about $1.3 billion launching its successful LH range.
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Ms. Keller added: "They don't know how to launch a car in a reasonable amount of time and for a reasonable amount of money. They have plenty of good people but they don't know how to orchestrate them. Chrysler found out how to do it."
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Ford's chairman, Harold A. Poling, said last year "was one of the most unusual years in our business" because of an uncertain world economy and the huge health charges. But in operations, Ford officials conceded that after years of leadership in Europe, its operations there were the company's trouble spot last year and lost $1.1 billion.
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Since 1990, Ford has been laying off workers to reduce manpower from 115,000 to 85,000 this year. The company took a charge of $419 million in the last quarter to pay for the reductions. The other identifiable large loss was about $400 million in Jaguar of Britain, which Ford took over as a prestige operation and is trying to turn around.
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"The results can be summed up by saying that it's mostly Jaguar and Great Britain for Europe," said David McCammon, the treasurer, in Detroit. He declined to predict that Ford of Europe would return to profitability this year, because of continuing sales declines for the auto industry.
.
But Ms. Keller said things would have been better if Ford had woken up earlier. "They were the king of the hill for so long and getting so many accolades that they didn't invest any money and didn't notice that GM, Peugeot, even Renault were reorganizing and catching up with them," she said. Burdened by big European losses and billions of dollars in U.S. health care costs, Ford Motor Co. on Wednesday reported the largest annual loss in American corporate history, even though its production lines are the most efficient of Detroit's Big Three.
.
Last year's loss of $7.4 billion by the nation's No. 2 automaker will stand as a record for only one day. On Thursday, General Motors Corp. is due to announce a much larger loss, of about $23 billion, composed almost entirely of a $20-billion charge for the future medical costs of its retired workers as part of a nationwide revision of accounting standards applying to all U.S. corporations.
.
This blizzard of bookkeeping losses has hit the auto companies harder than many others because over the years they have negotiated extremely liberal health benefit packages for workers in place of pay increases, but did not accompany them with any method of controlling medical costs - a national and not just a corporate problem that is finally forcing government reform of the private U.S. health insurance system.
.
Ford says its employee medical costs of about $800 a car are well below the industry average of about $1,000, but they still cost the company more than its bill for steel.
.
Ford had to take a one-time retiree health care charge of $7.5 billion under the new Financial Standards Advisory Board Rule No. 106. It also gained $657 million from a new accounting for income taxes. Even after these adjustments, its worldwide automotive operations lost $1.5 billion, an improvement of $1.7 billion from a loss of $3.2 billion in 1991. But this was hardly anything to boast about when revenues jumped from $88 billion to $100 billion in one year and the most consistently profitable part of the business was its financial services division.
.
U.S. operations lost $405 million despite an 8 percent rise in U.S. factory sales. This was boosted by Ford's Taurus overtaking Japan's Honda Accord as the best-selling car in America, assisted by consumer rebates averaging $1,030 a car for all Ford models and up to $3,500 for leases on the Taurus.
.
"How could they increase factory sales throughout the year and still lose so much money? They still haven't figured out how to make money selling cars in the United States," said Maryann Keller, an auto industry analyst with Furman Selz.
.
She said the company spent about $5 billion designing and launching the new Mondeo, which debuts in Europe next month, as a belated successor to the mid-range Sierra, and remodeling its Escort and Fiesta.
.
"And they boasted about it," she said, noting that Chrysler spent only about $1.3 billion launching its successful LH range.
.
Ms. Keller added: "They don't know how to launch a car in a reasonable amount of time and for a reasonable amount of money. They have plenty of good people but they don't know how to orchestrate them. Chrysler found out how to do it."
.
Ford's chairman, Harold A. Poling, said last year "was one of the most unusual years in our business" because of an uncertain world economy and the huge health charges. But in operations, Ford officials conceded that after years of leadership in Europe, its operations there were the company's trouble spot last year and lost $1.1 billion.
.
Since 1990, Ford has been laying off workers to reduce manpower from 115,000 to 85,000 this year. The company took a charge of $419 million in the last quarter to pay for the reductions. The other identifiable large loss was about $400 million in Jaguar of Britain, which Ford took over as a prestige operation and is trying to turn around.
.
"The results can be summed up by saying that it's mostly Jaguar and Great Britain for Europe," said David McCammon, the treasurer, in Detroit. He declined to predict that Ford of Europe would return to profitability this year, because of continuing sales declines for the auto industry.
.
But Ms. Keller said things would have been better if Ford had woken up earlier. "They were the king of the hill for so long and getting so many accolades that they didn't invest any money and didn't notice that GM, Peugeot, even Renault were reorganizing and catching up with them," she said.

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